What happens when business partners “divorce?”

If you are a partner in a Massachusetts enterprise, it may surprise you to learn that partnerships are analogous to marriages. How so? You and your partner(s) are individuals. You have different goals and objectives that may not be mutually compatible. You also have different work habits and methodologies that likewise may not be mutually compatible.

As reported by Entrepreneur magazine, all of these differences make partnerships 20-30 percent more likely to eventually break up than marriages. When these “divorces” occur, they often garner national or international headlines, such as was the case with Facebook, Microsoft and Apple.

Partnership agreements

Just as partnerships are analogous to marriages, so too are partnership agreements analogous to prenuptial agreements. Both seek to settle potential future issues between and among the interested parties before they arise. If you and your partner(s) do not yet have a partnership agreement in place, it is in your mutual best interests to draft and finalize such an agreement as soon as possible.

Your partnership agreement can contain virtually anything you and your partner(s) want it to. Most agreements cover at least the following:

  • Ownership percentage of each partner
  • Profit and loss percentage of each partner
  • Management and other duties of each partner
  • Buy-out provisions should a partner die or withdraw from the partnership

Partnership agreement advantages

Should irreconcilable differences arise between you and your partners(s) and one or more of you eventually decides to call it quits, your well-drafted partnership agreement will make everyone’s life easier and ensure the continued smooth and profitable operation of your business. Knowing ahead of time what to expect in the event of a “business divorce” gives you peace of mind. Neither you nor any other partner will have to make important decisions in a stressful atmosphere of distrust or outright animosity.

This is general information only and not intended to provide legal advice.

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