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6 tips to know before a business partnership divorce

On Behalf of | Mar 1, 2021 | Blog, Complex Business Litigation |

Regardless of the why, dissolving a business partnership is like a divorce. New Jersey partnerships can end amicably or land angry and in court. Take the high road and prepare with these six tips to know before a business divorce.

1. Tread carefully

If it’s time to talk to your partner about a business divorce, avoid going at it from a legal angle. You’ve worked closely with this person. The exchange has to be amicable, friend to friend. Let the lawyers do the legalese.

2. Get legal counsel

Having the advice of an acquisition lawyer may be a great way to plan and get ahead of potential challenges in a business dissolution. Even between friends, a buyout will be a technical negotiation, and professionals are likely best equipped for it.

3. Hire a third-party business assessor

A business’s worth can be a detail that causes contention in a buyout. It’s a good idea to get an objective view of the investment from an independent valuation firm. This is a sound way to begin negotiating fair pricing.

4. Don’t stick to the valuation

Simply because you have an agreed-upon valuation doesn’t mean that it’s set in stone. External factors like personal connections, expertise and future business value can all be legitimately considered.

5. Prepare for a battle

The buying partner and their legal team will go low. The seller and their lawyers will advocate for higher sums. This is where negotiations can turn into a battle. It might be a good idea to work from a slightly high price. You want to boost the long-term equity value of the company.

6. Look at financing options

A buyout doesn’t outright boost a company’s profit margin. Buying out a partner is often accompanied by a hefty upfront cost that you may not be ready to pay out of pocket. An SBA loan can help minimize the financial burden of a business divorce.

Whatever the reason, if it’s time to move on without a partner, you want to do it successfully. That means everyone walks away knowing they got what they needed, the business is set up to flourish.