Welcome to another week’s Play from my Small Business Legal Playbook. I hope the tips are helpful to you and your business, as these Plays are specially designed to give you a little insight on the legal side of running a small business. Today’s Play, “It’s Time to Break Up, LLC Edition” involves something most of my clients never expected to do: end a business relationship with their business partner.
So, what are the strategies I can recommend? First, talk things out with your business partner. As crazy as it might sound, business break-ups are often more emotional and destructive than divorces, because you may not be able to split children and assets exactly down the middle, but you can with a business, even if it’s to disastrous effect.
So, with that in mind, try and keep it from getting personal. As in my previous Plays, I try to separate the Play into Offensive and Defensive strategies, with Offensive strategies being proactive, and Defensive strategies being reactive. Last week we concentrated on the Offensive Strategies. This week’s Play is concentrating on the Defensive Strategy.
Defensive Strategy: If there already is a problem between you and a partner, you can try to make sure that a problem with your business partner doesn’t sink the business. If you believe your business partner is damaging the business with his/her actions, then make sure to document the issues and make note of them to your partner in a timely manner. Offer to buy them out, or to have them buy you out, for fair-market value. Offer to have a third party mediate, and finally, if you are going to be buying out your partner make sure that there’s a non-compete agreement involved. You don’t want to buy out your partner only to see them start a competing company with the cash that you use to buy them out. Yes, non-compete agreements aren’t usually legal in California. But they’re considered legal if they’re part of a contract like one in which you buy out a partner.
Hope you enjoyed this week’s Play, and stay tuned for next week’s play from the Small Business Legal Playbook! Remember to subscribe and get each play sent to you directly! Until then, may your businesses continue to thrive and your football teams be victorious. Keep playing to win!