How to Get Rid Of A 50/50 Business Partner

A large number of individuals opt for co-ownership when deciding to make a start-up investment in the hope of decreasing their workload and coming up with better ideas. Even though most people are attentive in the choice of a business partner, co-ownership relationships tend to get less harmonious as time goes by.

Once associates start having disagreements, the future of the firm becomes jeopardized. Hence, one of the associates usually decides to get rid of his/her 50/50 business partner for the benefit of the company.

Follow the tips below if you make such a decision.

Understand the business structure

The inceptive thing to consider when planning to get rid of a 50/50 business partner is the structure of the business. You have to inspect whether it’s a partnership or a limited company, as the structure has a major influence on the dissolution of a 50/50 partnership. In the event of partnership, both partners share profits and liabilities, as well as have the same rights when it comes to managing their business and making important decisions.

In most cases, each party contributes to the company with different resources. For instance, it often occurs for one of the partners to be skilled at management, whereas the other to invest the required capital for financing the venture. In order to enter a 50/50 agreement, the parties aren’t required to invest equal finances. Make sure you check the partnership agreement before taking any further steps.

Conversely, if the structure is a limited company, the assets and income of the partners are separate from the capital and profits of the company. In such a case, make sure you analyze the company’s memorandum of association prior to taking further action. See this URL to learn about the benefits of a limited company and how it works.

In any event, the partnership agreement has to be reviewed in order to check the protocol for a dissolution. The requirements listed in the agreement should be followed for the partnership to be successfully terminated. There are several types of dissolution agreements that partners can use to terminate their collaboration.

For instance, partners can agree to dissolve if one of them is no longer interested in being part of the business. In case your partner has decided to end the cooperation, you can buy his/her shares and become a single owner.

Moreover, a buy-sell agreement serves to protect the remaining associate from unwanted associates who intend to buy into the business. Such an agreement is of vital importance in the event of death, divorce, or personal bankruptcy, protecting the partner that’s left from divorced spouses or potential unfavorable associates.

Have a discussion with your partner

When making the decision to eliminate your 50/50 business associate, it’s important to have an open discussion with the other co-owner. There are various approaches on how to get rid of a 50/50 business partner, depending on the roles of the associates. There’s no universal method for terminating a partnership, as all partnerships are unique in their own way.

Even though delivering such news is often challenging for the associate asking for a dissolution, honesty is considered the best policy. You have to be candid about your intentions and use facts to back up your decision.

It’s common for emotion and sentiment to be involved in the process due to the bond developing between the co-owners over the years. Nevertheless, emotions shouldn’t be involved in the decision for the good of the business. Avoid feeling guilty when dissolving the partnership, as business leaves no place for emotions.

Furthermore, a conversation with your associate is indispensable in order to discuss the obligations that follow after the dissolution. The debts and future liabilities should be discussed in detail between the partners before filing a dissolution form.

File a dissolution form

After having a discussion with your soon-to-be former associate, the next step involves filing a dissolution form. This statement is a formal way of starting the procedure for a 50/50 partnership termination. Make sure to check the instructions for completing such a statement in your state, as these vary across regions.

Understand the effects

Once a partnership is terminated, the assets cannot be divided between the associates until these are liquidated. The assets should be used to pay off the remaining debts to outside creditors and the associates themselves. The debts to the creditors should be paid off first before the rest of the money is used to pay off the debts to the partners. Follow this link, https://en.wikipedia.org/wiki/Liquidation, to gain a better insight into the process of liquidation.

Final word

If the co-ownership relationship isn’t as harmonious as in the beginning, make sure you get rid of your 50/50 associate.

It’s an emotionally challenging but indispensable process!