How to protect yourself in a business 'divorce'

The standard protection available for business owners comes in the form of partnership and shareholder agreements. But let me ask existing small business owners this: what written agreement do you have between your fellow business partners; and will that agreement really help you to sort out any disagreements should they arise?

I reckon the majority of you will answer either "None, but I trust the other person and there is no need for a written agreement" or "I do have something in writing and I'm pretty sure all eventualities are covered, but I can't be 100% sure."

In life we all enter into relationships with other people with good intentions.  For the majority of us the last thing on our minds is that everything could go wrong - in romance or in business. Most people working together will naturally concentrate first and foremost on what is going to drive a business forward rather than drawing up contingency plans.

But let's look at this another way. You are about to embark on a venture with someone that could last 20 or 30 years. Think back to your teenage years and the boyfriend or girlfriend that you first fell in love with.  If you are anything like me that is some time ago now… You probably thought that this relationship was 'the one'.  Contrary to what your parents and friends told you nothing could detract from the way you felt.

Remember when you broke up how rubbish it felt having to spend a considerable amount of time in a darkened room listening to Joy Division and vowing never to go out with anyone ever again?  Okay, fair enough - that was just me.

Hindsight is a great vehicle for moving forward and learning from mistakes.  With that hindsight I look back at my first relationship, recognise all my mistakes and know that if I had just protected myself a bit more I would have been listening to less "Love Will Tear Us Apart" and more "Alive & Kicking".

So after opening up that old wound, let us apply the scenario into business.  I think you would all agree that honesty, integrity and respect are the order of the day. One of my aims in my professional life is to approach everything with common sense and gusto.  If a business relationship is not working then I want to be able to exit that relationship in the right way, with a hand shake, a smile and a genuine wish that the others person's endeavors will bring them good fortune. Please believe me, that is not always as easy as it sounds.

Business can have a habit of turning the best of friends into the worst of enemies. I was once told by a very wealthy and successful entrepreneur that you should never have a partner and if you do they should never be an equal partner. In his view one person always ended up doing the work and that person would become resentful.

Actually, this particular person did have a partner who held 10% of the business and for that 10% he actually did do all of the work. I personally would not have structured the business like that but it worked for the 90% shareholder. The reason it worked: everything was clearly agreed and defined up front.

To find out how to put avoid the pain of a business divorce, check out our guide on drawing up a partnership agreement.

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