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Do you have to close your business when a partnership ends?

May 10, 2019

You feel like you’re going through a divorce, even though you’re not married. The problem is your business partner. The two of you started working together five years ago, and it is clear to you that the relationship has come to an end. You can’t go on anymore, and you plan to end the partnership.

Does that mean your company has to close its doors? Is the dream over? Do you have to start from scratch?

You may have to close the business, but experts suggest only doing this as your last resort. Do not just assume that the business has to close down. There are ways to get around it.

Types of partnerships

First of all, consider the type of partnership the two of you have. Do you own the business equally? How many other people are involved? Who has the majority share?

The biggest risk here is if your partner is a majority owner with a controlling share. Even then, though, you have options. Can you buy him or her out? For instance, if your partner’s stake in the business is worth $500,00, is there any way to buy that share in cash and take over full control? If so, the business may survive.

Did you draft a partnership agreement at the beginning?

Many partnerships begin as informal agreements, but it is wise to get things down on paper with an official partnership agreement. If you did that, it may give you all sorts of options. You may have agreed up front about what should happen in a situation like this, and you both are bound to the agreement. Moreover, if your partner violated the agreement in some way and that’s why you want to end the partnership, that could give you the upper hand.

Selling to a third party

A third option to keep the company alive is to sell it off. Doing so obviously has massive ramifications for your own career, but it may mean your employees get to keep their jobs and your customers get to keep buying from the same business.

Depending on the value of your company, selling may even feel like an attractive idea because you could both earn a lot in the sale. This way, after you end the partnership and move on to whatever is next in your career, you have a fair amount of capital to get started. That never hurts if you want to start a new business on your own.

Your options

As you can see, it is certainly not a given that your business has to close. Just make sure you know what options and rights you have as you move forward.

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"The Epstein Law Firm recently obtained a multi-million dollar settlement in an extremely complex and difficult financial services case. He and his team not only mastered the complex issues in the case, but also expertly handled all aspects of the negotiations. I cannot thank Michael enough for his dedication and hard work, and I highly recommend him and The Epstein Law Firm for those who need smart, creative, and aggressive lawyers who put their clients’ interests first.”

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