If you are married and want to break up you file for a divorce.  But if you want to break up with a business partner, the process is actually similar.

If you are going to start a business or join one, it may sound counter-intuitive, but the first thing you should be thinking about is what are you going to do if you want out of the business.  No one likes to think that way, but any good lawyer will tell you that you should have a partnership agreement.

A partnership agreement is like a pre-nup.  It decides up front why you’d sell, how much you’d ask for and what to do if one of you wants out and the other one doesn’t.  So if the agreement says that you have to pay me 95% of the value of my shares or sell the business, there is no fighting over what you are owed once the valuation takes place. If it lists a specific dollar amount the same thing is true.

But if you have no agreement then there is chaos and the only way to get out if you can’t agree is to go through a potentially expensive legal battle.

We recently were called be a restaurant owner who wanted to sell.  His partner wanted to keep going, but didn’t have the funds for a buy out.  So now the caller has to hire a lawyer and file a suit with the hopes that a Judge will order his partner to put the business up for sale.  He can still get the result he wants, but it will be messy.

When you start a business, you likely want to save some money.  I know I did.  But if you are going to skimp, don’t do it on getting a clear partnership agreement put in place that details what each partner is supposed to do and how they will handle problems.  If you don’t then you are asking for trouble sometime down the road.