In 2015, the number of partnerships doing business in the U.S. surpassed two million. That may sound impressive, but if you take a closer look, you’ll find that most business partnerships seldom endure.

What’s the best way to break up a partnership? What are the challenges of breaking up with your business partner? What are the potential advantages and disadvantages?

Every business in Florida is unique. Whether you are launching a partnership or dissolving one, you’re going to need the personalized advice and insights of an experienced Central Florida business attorney.

HOW FREQUENTLY DO PARTNERSHIPS BREAK UP?

“Breaking Up is Hard to Do” was a hit song forty or so years ago, but when it comes to breaking up business partnerships in the 21st century, it happens all the time, and it’s probably more common than you think.

Entrepreneur.com, for example, reports that the business partnership breakup rate in the United States now exceeds the divorce rate.

Below, after some terms are defined, you’ll learn how to protect yourself, your business, and your best interests if a dispute arises with one of your business partners.

WHAT IS A PARTNERSHIP? WHAT ARE THE TYPES OF PARTNERSHIPS?

A “partnership” is a business – that is not a corporation – that’s owned (or more precisely, co-owned) by more than one person.

The three forms that a partnership can take are:

1. General partnerships: When two or more persons jointly do business for profit, it’s usually a general partnership, and every partner is defined as a general partner.

2. Limited partnerships: The owners of a limited partnership must include a “limited” partner or partners as well as a “general” partner or partners. Personal liability for the debts of the business belongs to the general partners but not to the limited partners.

3. Limited liability partnerships (LLPs): LLPs protect partners from liability or responsibility for another partner’s misconduct or negligence.

ARE YOU PREPARED FOR A PARTNERSHIP BREAKUP?

Every business person knows that it’s mart to prepare your business for the future. If another partner suddenly dies or unexpectedly suffers a debilitating injury or illness, or if unresolvable differences emerge, what will happen?

Partners need to know.

Understanding how to dissolve a partnership properly, and putting a dissolution plan in place for your own partnership, is imperative.

If it’s not handled properly, dissolving a partnership can damage your business with disruptions and bad publicity. In the worst scenario, dissolving a partnership can put you out of business.

HOW CAN A BUSINESS LAWYER HELP?

With diligent advance planning, breaking up with your business partner does not have to disrupt or negatively impact your business.

Far too frequently, ex-business partners accuse one another of intentional interference, property conversion, breach of contract, and a number of other charges.

But with a good business attorney’s sound advice – right from the start – partnerships in Florida can prosper, and a business or personal disagreement doesn’t have to grow into a difficult legal dispute. If you are in New York, a New York civil law attorney may be able to help.

HOW CAN YOU PROTECT YOURSELF IN A BUSINESS PARTNERSHIP?

Listed below are some recommendations for partnerships or for anyone starting a partnership here in Florida:

1. Have a business lawyer draft your partnership agreement.

2. Have the books kept by a commercial accountant or accounting agency.

3. Record and keep the minutes of all business meetings.

4. Decide if partners should sign non-solicit agreements or non-compete agreements.

5. Spell out in writing how the partnership’s dissolution will be handled.

6. Ensure that each partner understands his or her own fiduciary duty.

7. Spell out in writing how partners are to be compensated and assets are to be divided.

Attorney Melody Lankford suggests, “…in an ideal situation, the governing documents of the company will address how to handle the situation when one of the business partners leaves the company either voluntarily or involuntarily. I recommend that my clients create these governing documents when they are first forming the company. This is similar to a honeymoon period for the business partners and even though it can be uncomfortable to discuss “what ifs,” this is the best time to make those decisions.”

She adds, “in some cases, a business partnership will not come to fruition because they partners could not agree from the outset. I tell my clients that is the best time to realize that you will not make a good partnership. On the other hand, if this is not discussed in the governing documents, the situation will be analyzed in light of state law. In most of these cases, both parties will retain legal counsel and the process will be long and drawn out. I highly recommend that these situations be addressed at the inception of the company.”

HOW DO PARTNERSHIP BREAKUPS HAPPEN?

Business partnerships seldom go bad unexpectedly. More often, disappointments, disagreements, suspicions, and tensions incrementally rise over time, slowly eroding trust and respect among partners.

And sometimes, the most trivial disagreement or dispute is the last straw when partners are ready to call it quits.

Your partnership agreement should spell out each partner’s responsibilities, and it needs to guarantee that partners have access to all company records, books, client lists, and company correspondence.

But as you might imagine, even the precisely-written agreement sometimes can’t stop a legal dispute from emerging.

HOW ARE BUSINESS PARTNERSHIP DISPUTES RESOLVED IN FLORIDA?

Legal disputes between partners don’t necessarily have to be contested courtroom trials. In Florida, most partnership disputes are resolved out-of-court through arbitration or mediation, saving both sides money and time while protecting your business from disruption or damage.

If you’re convinced that breaking up with your business partner is unavoidable and imminent, determine your priorities.

When there’s no dissolution plan in writing for the partnership, you may need to consider a buyout, and you may need to change your company’s business structure. Take into account your personal finances, your liabilities, and your business and personal goals and needs.

Partners must protect their interests, so when partners split, who gets what can very quickly become the only really important question.

The genuine value of a partnership is based on a variety of factors, so in some cases, the testimony or statement of a valuation expert will be needed to determine precisely what the business is worth – and who gets what.

IN A PARTNERSHIP BREAKUP, WHY IS A LAWYER’S ADVICE IMPERATIVE?

If you’re breaking up with your business partner, try not to let your emotions influence you. Think clearly and objectively. Seek a business lawyer’s insights and advice.

Unfortunately, and far too frequently, a business owner will wait until the last possible minute to retain the services of a business attorney. But when you work with a good business lawyer from the start, that lawyer can usually put legal solutions in place before legal disputes emerge.

After reviewing the facts, a good business lawyer can suggest the best ways to handle a partnership breakup and the most constructive ways to move forward after the breakup is final.

The demands and challenges of owning and operating a partnership in Florida can be daunting. Business owners need all the help they can get.

Before your dreams and hard work are put at risk by a partnership breakup or by any other potential legal dispute, put an experienced business lawyer to work on your behalf.

By: Melody Lankford
After graduating from Davidson College, Melody Lankford earned her J.D. from Florida State University’s College of Law in 2004 and was admitted to the Florida Bar that same year. Ms. Lankford joined Raydon Corporation as in-house counsel in 2004. She worked there until 2012, when she founded the Lankford Law Firm. She is an experienced Daytona Beach small business attorney who offers sound legal counsel and experience-based insights to her business clients.