Outlining how to dissolve your business at the start could save headaches later

You’ve found the one – that one person who shares your vision and has the same level of excitement about a business idea. The one who shares your motivation and willingness to put in the hard work needed to bring your vision to life and share it with the world. But wait. … Are you prepared to break up?

Change is constant in the business world. Companies expand and they fold. People, communities and technology changes. As pizzeria operators, we prepare for change in so many ways: We establish procedures for altering a recipe for unexpected hot weather. We have protocols for how to call additional staff in on an unexpectedly busy night. But do we structure our business so that a split, a sale or even the death of a partner is not the death of our business? It might not be fun to stop the forward momentum once you have found “the one,” but as we all know, prenups were created out of necessity.

Protect Yourself

Imagine decades down the road, operating a successful business, a partnership with a family member or friend. It is time to retire, maybe pass the company down to the next generation. As this process begins, you learn there might be a difference in business philosophies. Maybe you find out a partner has not been paying taxes, or they’ve been taking tips from employees. What do you do? Well, of course, you are going to dissolve the partnership! But what if the partner does not want to dissolve the partnership? What if you are left with the choice to either walk away with nothing or risk your freedom and the financial stability of your family?

This is not an uncommon story; it can happen to you, and the road to recovery is long and expensive. However, there are steps you can take to protect yourself, your business partner and the business.

Interview Your Partner

Get to know your prospective partner. Spend time with them. How do they spend their free time? What do they like to do? Are they introverted or extroverted? Discuss with them past challenges and how they dealt with them.

Get to know their professional/career history. Interview them as you would a potential employee of your new business. How long have they worked in an industry? How long have they held previous jobs? Do they have other partnerships and businesses?

What is their financial history and current financial status? Are they a saver? A spender? Do they have other investments?

Ask them for a detailed description of their business vision. Where do you see this business operating? Do you see opportunities for expansion? If so, how soon?

What do you each envision yourselves doing in the proposed business venture? What areas do you excel in? Do you have a particular skill set? What about work hours? How many hours can you devote to the business?

Set Expectations in Writing

After this period of discovery, if the partnership still seems like a good match, it is time to set clear, detailed expectations and job descriptions. What do you expect from your partner? What job and tasks should they perform? How many hours per week will you each work?

Bring in the legal team. Oh, and don’t forget the accountants, you need their advice as well.

This is not the fun part of starting a new business, and it can be expensive, but the investment is worth it. A few hundred dollars and a few hours of time spent now could save you hundreds of thousands in litigation years down the road.

Your legal and accounting teams will assist you in creating an agreement that establishes the terms of your partnership in as much detail as you want. It can delineate the terms for what happens should one partner decide to retire – or, in the event a partner becomes gravely ill or dies or chooses to sell their portion of the business.

Answering Key Questions

It also can establish acceptable business practices and consequences should a partner be found not to be honoring the agreement. These professionals will help you answer questions such as:

• What will your corporate structure look like?
• Are you the president, or is your partner?
• Will this corporation house many locations, or will each location have its own corporation?
• How will you be impacted should the partnership dissolve?
• Who will be the statutory agent in the eyes of the liquor department?

Changes to licensing and ownership of websites can be time consuming and costly. Some people do not learn how difficult it is to change ownership of a bank account or a merchant-processing account until it is absolutely necessary to do so.

Should you find yourself in an established partnership, it is never too late to make sure you have legal documentation and the correct corporate structure that protects the business and its partners.

Having the correct structure – with documented agreements regarding business practices – will prevent many unforeseen issues should the dissolution of a partnership be needed for any reason.

LIZ BIOCCA owns and operates with her brother, Joe Spina, several Mama’s Famous Pizza and Heros locations in Tucson, Arizona.