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Unwelcome bed fellows – getting rid of unwanted business partners

While there are always businesses that are started up and run as a “sole traders”, there is in my experience a much greater appetite for people to go into business as a group. That might be just two who have matching or complementary skills – or it might be more (sometimes many more) where the business just needs the extra momentum and the extra working capital that a larger group can bring.

Hard decisions

At some point, however, we may have to make hard decisions about the people we are in business with. Often this is caused by a particular issue or problem flaring up (for example, the fact that we need to put in more money, or cut our income, or give guarantees to the Bank ….) and at these times we might realise that, although we were very happy being in business together before, the harsh reality is that we aren’t happy any longer.

Business structures vary, and whether or not you are in business with other people as a limited company, or in a traditional partnership or in a more modern limited liability partnership, or something else, there are going to be challenges in how someone leaves. Ideally you will have thought about this when you started in business and written down a suitable shareholder agreement, or partnership agreement, or whatever – but, very commonly, this is not the case.

A written agreement?

While I would be delighted if every new business spent money having lawyers produce any number of documents of this nature, frankly, at the start of a business, money is often better spent on other things. I will often advise people to go with the simplest form – to use a generic term – partnership agreement just to get things going in the expectation that we will update that if the business is going to be successful. Sometimes though we don’t even have the simple agreement – and all too often things are too busy to update that simple agreement anyway.

It is when we realise that someone is no longer pulling their weight, or perhaps isn’t around to participate in the business (perhaps they have been injured, or off sick, or are dead) that we have to think about what the consequences for the business are both in continuing without that person, and in perhaps buying that person out. The same is true in many facets of life but, when money is involved, these sorts of issues in a business are often potentially at least as difficult as divorce.

A cunning plan

If though we plan for that in advance (or at the very least tell your business advisers at the earliest opportunity that there is a problem) this can be resolved, and can often be resolved in a way that everyone doesn’t have to hate each other. Certainly, it can be resolved without the need to be spending a vast amount of money on lawyers or courts or anything like that.

The problems come if we ignore this, or turn a blind eye, or just hope things will get better. Things, as a rule, do not get better. That applies as much in our personal relationships as it does in our business relationships. Perhaps this would be a good time to think about the people you are in business with and decide whether you really want to be?

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