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What happens when your business partnership breaks up?

On Behalf of | Mar 20, 2020 | Business Law |

Studies show that business partnerships break up more often than marriages do. In fact, you stand a 20%-30% greater chance of your business partnership dissolving than your marriage dissolving. 

Entrepreneur.com advises that your business partnership breakup could be just as acrimonious, if not more so, than a marital breakup if you do not plan for this eventuality virtually from the moment you and your partners join forces. To minimize the disputes and hard feelings as much as possible, you need a well-drafted partnership agreement. 

Partnership agreement provisions 

Your written partnership agreement is a binding legal contract between you and all of your partners. If you drafted it well, it should have provisions in it setting forth the following: 

  • The capital contribution amount each partner brought to the partnership 
  • The consequent ownership interest each partner acquired 
  • The proportion of profits and losses for which each partner assumed responsibility 
  • The proportion of partnership liabilities for which each partner assumed personal responsibility via his or her personal assets 
  • The mechanism(s) by which the partners will adhere should any of you die or decide to leave the partnership 

Legal challenge 

Under normal circumstances, your partnership agreement will serve as the only document you need when breaking up your partnership. Should one or more partners, however, choose to challenge the validity of the agreement in court, (s)he or they have every right to do so. (S)he or they will, nevertheless, have to produce clear and convincing evidence of why the agreement should be overridden by whatever (s)he or they seek to accomplish. 


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