How to deal with Business Partner Problems
In the world of entrepreneurship, having partners is both rewarding and challenging. Although most business partnerships thrive on mutual respect and collaboration, some can devolve into toxic relationships. As the proverb states, “iron sharpens iron,” and similarly, one person sharpens another. However, like sharpened iron, partners can injure each other, particularly when one partner mistreats the other.
If you find yourself in a situation where your business partner is mistreating you, it’s essential to address the issue promptly and effectively. Here’s a comprehensive guide on what steps to take to protect your well-being and your business.
- Common Problems with Business Partners
All partnerships experience occasional partner issues. However, the issues below are red flags. Ask yourself these questions to determine if there are any red flags in your partnership:
Do I feel disrespected by my business partner? If your partner is more than rude but fundamentally disregards your opinions, ideas, or contributions, it may be a sign that you need to act.
Partners in a closely held corporation have a fiduciary relationship. The law imposes on each of them the highest standard of integrity in their dealings with each other. This means partners must deal openly, honestly, and fairly with each other. Evans v. Blesi, 345 N.W.2d 775, 779 (Minn. Ct. App. 1984)
Is my partner no longer loyal? Loyalty is critical to business partners. If your partner lies to you, steals from the company (even a little), or takes partnership opportunities for his own gain, you are experiencing red flags in a relationship. It’s time to seriously look at getting out.
Does my business partner manipulate me? It is a red flag if your business partner is a manipulator who makes unilateral decisions, undermines your authority, or takes action behind your back.
Does my business partner exhibit poor communication? If you have a dishonest business partner, or one who simply avoids communication, it may be a sign that there are deeper issues.
- Can I walk away from a business partnership?
If you want to leave your business partner (“Disassociation”), you will need to seek legal advice. You will be asking for a business divorce. Leaving a business partner is often as complicated as leaving a marriage, which is why it’s called a Business Divorce.”
Your rights and obligations are set out in your partnership agreements, corporate governing documents, and statutes. A good lawyer can guide you to solutions for partner issues.
- Can I kick out my business partner?
Kicking out your business partner (“Expulsion”) is sometimes possible — if your partner is engaging in serious misconduct. Again, your rights and obligations will be found in your partnership agreements, corporate governing documents, and statutes. You will still need a Business Divorce and, in most cases, will have to pay your partner fair value for his ownership (less any damage they have caused).
- How do I get rid of a useless business partner?
If you have decided to get rid of your bad business partner, you need to take some steps to prepare before you pull the trigger.
- Consult an attorney. They will be able to review your situation and create a strategic plan based on your rights, obligations, and goals.
- Prepare for a business transition: Be sure you know who will take over the duties your partner was handling.
- Prepare a communication strategy: Internally, your team will want to know what happened to their other boss. Externally, you will need to communicate with clients who they may have had good relationships with.
- Think about financials, IT, and other business secrets. You will need to be sure that your business partner does not have access to systems and accounts that would enable him to damage the business.
- Have your written proposal and corporate action ready when you break the news. They probably will not accept your proposal. But this clear written documentation sends the strong message that this is the end of your partnership.
- Dealing with a mistreating business partner
Taking proactive steps can help you regain control of your professional life. By recognizing the signs, documenting incidents, and communicating effectively, you can address the issue head-on. If necessary, don’t hesitate to seek legal advice. Ultimately, your well-being and professional integrity should be your top priorities as you navigate this challenging situation.
Terrance W. Moore is a partner with the Hellmuth and Johnson Law firm in Minneapolis. His book, The Bulldog Guide to Business Divorce can be found on Amazon.
