Now you discover your partner is a problem

When businesses start up the founders are often full of excitement and wearing their rose-tinted spectacles.

Friends for years or work colleagues with a common vision how to change the world and become rich in the process embark on the perfect partnership.

Similarly, you have built up your business having put in long hours and taken risks, and now a trusted staff member is ready to be admitted as a partner to recognise their contribution, motivate them to help you take your business to the next level or perhaps prevent them leaving!

Welcome to partnership, which is a very different creature to being master of your own business.

When I refer to partnership it could be as unincorporated partners with joint and several liability for the business debts or it could be as shareholders, with equal or unequal rights. The difference between the two is quite significant and I would like to think that appropriate professional guidance had been sought prior to entering into the relationship.

Many problems with partnerships are avoidable, or at least have a clear path for remedy, if the requisite paperwork was in place prior to commencement of the partnership.

But now down to business, let’s look at dealing with the problem of how to handle a partnership you are coming to regret.

The first step is to identify in your mind exactly what the problem is and to determine whether it is in reality a problem, or simply an irritation that can be remedied without too much trouble or a falling out.

And talking of falling out, it is important to strive to avoid falling out and manage the problem with dignity during and after any separation, especially when tongues wag and the gossip mill cranks up.
Apart from endeavouring to be a decent and nice person, the world is a small place and everybody is connected to everybody else. Hard won reputations can be destroyed at the stroke of a keyboard.
Once you are clear what needs addressing, it is time to look at how to approach the matter.

If it is something that has arisen out of a failure of your partner to understand their roles and responsibilities then the approach needed is somewhat different to facing down matters that undermine the all important mutual trust and respect.

In the first scenario, especially if the partner is new to the role, it should be relatively straightforward to gently steer them onto the correct path, especially if you catch it early enough and possess the correct people skills without too much winger wagging. Somebody who finds themselves transformed from an employee into an owner could easily struggle with balancing their new found responsibility against their feeling of empowerment and perceived independence.

In the latter situation you need to sit down together and you need to make clear your frustration. Whether it is their treatment of staff, financial demands in drawing money out of the business or expensive tastes for decorating their office, it needs confronting, and unfortunately often it is a true confrontation as they feel a sense of entitlement. Maybe they will respond accordingly, perhaps complaining that you are treating them like a member of staff instead of a peer. Either way the conversation needs to be had – leaving it to fester is not a solution, it simply kicks the problem down the road only to swell in size.

Obviously, the approach needs to be level headed and without finger pointing, but if you truly feel it is serious and they will not listen you perhaps it is time to consider mediation, using a mediator with the requisite experience in boardroom disputes.

In the final analysis it could well be that you have made an error of judgment in taking on a new partner or entering into a partnership in the first instance, but you need to be cognisant of the fact that where you are now, the only resolution might well be the dissolution of the partnership, something that will likely resemble a logistical and financial nightmare for an established business, or perhaps to buy out your partner and take the financial hit, but move on swiftly and draw a line under the affair.

There are no easy answers but remember that once you have signed over a share of your business to new partner, you cannot simply take it away or sweep them aside dismissively. Your relationship is determined by the law, and how you manage it is out of your hands to an extent, in ways that you would never have imagined.

Ultimately the solution is to be found in how you set up the partnership and any governing document but the key is to minimise disruption to the business and avoid financial fallout.

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