Business Divorce is a fact of life. A red flag is an action or event that signals a business is heading to a divorce. This article discusses some of the common red flags business partners ignore at their peril.
How to Protect Your Business When You Leave the Partnership
In a closely held business or a family business, a red flag is an action by one partner that demonstrates problems with habits, traits and values. These might include breach of fiduciary duty, a business partner spending company money, or one partner saying, “I want out of my business partnership.” If you are wondering how to fire your business partner, you have probably seen a red flag.
Your first step should be to call a business attorney. A business divorce attorney will review your operating agreements, partnership agreement, and minority shareholder rights. In closely held businesses, uncontested departures happen, but an expert can help you reach the optimal business divorce settlement and protect your business when you leave a partnership.
Can my Business Partner Push me Out?
If your partner tries to push you out, you have a problem. Unilateral partner action comes in many forms. The most common forms of unilateral action are taking a distribution from the company, borrowing money on behalf of the company, or entering into a major contract for the company.
A partner taking unilateral action might enter into a contract with a vendor without consulting his partner. He might take money out of the company. He might take a loan and then claim that the company really needed the financing. Your partner should always consult you before taking major action.
Spending Company Money for Personal Expenses
Many business people have a credit card to use for business expenses. Partners should never commingle business with personal funds. Using company credit cards for personal expenses is a violation of this rule. If your partner is using the company card for personal expenses, it is a red flag that she may have personal financial problems.
My Business Partner Cheated Me
Good partners are always open and honest with each other. This means sharing good news and bad, triumphs, and troubles. If your partner is cheating or lying to you, that’s a red flag.
There is never a good reason to cheat or deceive a business partner. Be especially wary of cheating on small things. A person who will cheat about little things will also cheat on big things. If your business partner lies to you, your trust will naturally break down. Loss of trust is the beginning of the end for a business partnership.
Be wary if your partner cheats on their spouse. Anyone willing to be dishonest with their spouse will also be dishonest with their business partner.
Breakdown in Communication
The most important aspect of strong communication is that partners listen to one another. It is healthy when partners respectfully disagree. It is unhealthy when partners stop listening.
If your partner just stops caring about your input, or is chronically distracted, that’s a red flag. If your partner does not have time at work to discuss serious issues, or seems chronically distracted, this may be a sign of other personal issues.
If you think your partner has stopped listening to you, you should set aside time to discuss it, perhaps after hours. Openly discussing problems like poor communication is a sign of a strong partnership. Not discussing such issues, and not listening to each other, is a red flag.
About the Author
Terry Moore earned his reputation as a “bulldog lawyer” by being aggressive, tenacious, and practical. He handles business partner disputes and other complex matters. Terry is the author of two books, Big Force Negotiation and The Bulldog Guide to Business Partnerships.