The easiest and fairest way to resolve a partnership dispute
Hopefully, a good organizational agreement will provide for a way to resolve these disputes between partners, but, as you have seen in previous posts, they don't always.
What I'm going to provide you today is the easiest, fairest, most common sense way to resolve a dispute between two partners over the direction of the business. First, however, a few caveats:
1. You'll need to have your finances in order.
2. You'll need to understand the possible ramifications that will result from this method.
3. You'll need to prepare yourself to be satisifed with whichever result occurs.
Those warnings are cryptic, aren't they?
Here it is, then: If you and you partner are at odds, or are wanting to go in different directions and can't resolve your differences, meet with your partner, and make him this offer (and for this example, I'm assuming two partners who are equal owners).
1. You think that the partnership between the two of you is going in different directions.
2. The best thing for everyone is if one partner buys the other one out.
3. One partner should set a value for the business (i.e., what that partner thinks the partnership, or at least his half of it, is worth).
4. The other partner then gets to decide whether to sell at that price, or to buy at that price.
5. You give him the option to decide whether he wants to set the price, or whether he'd rather decide whether to buy or sell.
6. You wait.
Think about how absolutely, finally, quickly and fairly this can effect a business buyout and a resolution of the dispute--whether you're running a lucrative partnership or one that is barely struggling along.
I was involved with a buyout, recently, where this occurred. One partner decided to make this offer to the other. Before he made the offer, he searched his soul, and made a decision at what value he'd place on a partnership interest. Then he determined that he'd be happy either way--if he got bought at for that price, he could live with it, or if he was asked to buy the partner out at that price, he'd live with it.
He then approached his partner, and made the suggestion for a buy/sell. The other partner agreed. Now, think about how easy things become at this point: My client had already decided his value point. If the other partner decided to set the value, my client could make his buy/sell decision in about 30 seconds, simply based on whether the offer was higher or lower than my client's buy/sell point he had already mentally set.
Or if (as was the case in this instance) the partner asked my client to set the price, my client could offer the price he'd already decided, and then sit back and wait for the partner to make the decision of whether to buy or to be bought out.
The two hardest parts about this mechanism are (1) coming up with a value that you can live with whether you buy or sell and (2) convincing the other partner to do this (for example, perhaps the other partner would only want to sell, or would only want to buy, etc.). But once the other partner agrees to this mechanism, the buyout will be fair.
In my client's case, if his partner had thought the price offered was too low, then the partner had the right to buy my client out at that low price. If he thought the price was unrealistically high, then he could sell out to my client at that price. Conversely, my client had to be realistic about the price. Perhaps he would've liked to have sold for a higher price, or to have bought out his partner for a lower price, but since he did not know which choice his partner would make, he had to make a price that he could live with either way.
If you have any more questions about partnership issues in North Carolina, feel free to schedule an appointment at 704-735-0483.