Partnership can be quite rewarding for businesses, notwithstanding their size. After all, it allows entrepreneurs like yourself to combine skills, resources, and efforts to build a successful business.
But you’ll also agree when I say that disagreements and conflicts are also commonplace among business partners. In fact, this can also lead one or more partners to part ways.
And when this happens, it’s crucial you handle the partnership dissolution with caution. You want to avoid costly legal battles and disputes that hurt the business.
To that end, you can start off by getting a business valuation service and then proceed with other steps discussed in this article for a smooth dissolution.
Business valuation is key before ending partnership
A partner exit often involves buying out your partner’s shares and compensating them for the same. Also, they might sell their shares to a third party.
But whatever be the case, it’s essential at this stage to understand the true worth of your business.
And this is exactly where a neutral business valuation expert can help quantify the dollar value of your firm. This, in turn, will eliminate any disagreement over the company’s value.
There are several ways a valuation expert will quantify your company’s value, including looking at its assets, future earnings potential, or comparable sales data from similar companies. Herein, the evaluator will assess your business’s unique situation and suggest methods that suit your business’s interests. Think of them like your web design agency which suggests multiple branding and design ideas to resonate with your brand and business.
With a credible dollar figure, you can proceed with negotiations for a fair and amicable partnership dissolution.
How to proceed with partnership dissolution post-valuation?
Having figured out the dollar value of your business, it is now time to get started with the partnership dissolution.
Now, there are several best practices that you can follow when dissolving a partnership agreement to ensure a smooth and undisputed partner exit. Here, your goal should be to keep the exit as amiable as possible since disputes only ruin your business.
All in all, here’s are a few must-do practices for a seamless partner exit:
1. Review the overall partnership agreement
The first step in partnership dissolution is to read and re-read the agreement carefully.
You see, partnership agreements are legal documents outlining the terms of partnership as well as the procedures for exits and dissolutions. So, be sure to read the terms and follow them in order to stay on solid legal ground.
2. Have open discussions with your partner/s
It is super important that you have an open and honest discussion with your partner/s about the situation and why you think a partnership dissolution is in mutual interest.
Here, you should be open to listen to their perspectives as well. Also, it’s sensible to be willing to negotiate and compromise if possible.
Most importantly, you should avoid rash decisions or actions that could damage the business or your relationship with the partner/s.
3. Hire a lawyer if needed
No matter how amicable the split is, it is essential to have an experienced business attorney by your side.
Your attorney can review the agreements, valuations, and proposed terms to ensure your rights are not violated. Also, they can assist you with formal paperwork for exits or dissolutions.
Not to mention, a lawyer can act as a mediator and expedite stalled negotiations.
4. Settle the business’s finances
From outstanding partnership debts to distributions of assets and other financial obligations, there are a lot of monetary issues that you’ll need to settle before partnership dissolution.
So, it makes sense to figure these things out beforehand to ensure there’s no disruption to the exit.
5. Notify and reassure all stakeholders
Your business is more than just you and your partner/s. So, a partnership dissolution will also impact other important stakeholders like vendors, clients, and landlords.
So, take some time out and have a word with them, reassuring that the partner’s exit will not impact their roles. This will retain your professional reputation and be valuable for your future endeavors.
6. File a partnership dissolution form
Finally, it’s time to file all required paperwork for partnership dissolution and officially end the partnership.
This will involve releasing the partner/s from associated liabilities. And since the exact requirements vary for different states, consult with your lawyer to ensure you’ve ticked all the checkboxes.
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Final words
Dissolving a partnership is challenging, and we can’t agree more.
But it doesn’t have to be a nightmare. So, make efforts to remain professional, follow the agreed-upon procedures, and leverage professional support for valuations and legal counsel.
Also, minimize conflicts to retain your and your brand’s reputation in the market.