When Business Partnerships Go Bad

Rule number one of Texas business partnership law is that business partners are equal partners in all aspects of their business. That is a simple statement, and a fairly easy concept, but many people are surprised when they see the concept applied in a business breakup, when emotions and vastly differing ideas of what is fair are the rule, not the exception. Business disputes, particularly between partners, can be very emotional and ugly.

Any lawyer who handles business disputes between partners can tell you that there is little difference between the reactions of business partners and those of angry spouses when the relationship breaks up. One spouse, or one partner, typically will sputter about “it not being fair” and how he or she “built the business by working my tail off while she spent her time at the country club”.

Another similarity between business disputes involving partners and divorce litigation is how betrayed a partner can feel when he finds the other partner “cheating” on him.
From a purely business standpoint, unless you and your business partner agree otherwise in a valid written contract, the law says that you share responsibilities and assets equally. It doesn’t matter if you keep separate accounts at different banks. It doesn’t matter if one partner works and one doesn’t, or if one makes more money than the other. The law is not going to penalize either for “not pulling his weight”, not working hard enough, not making enough money, or spending too much time watching football and not enough time helping with the chores, or marketing.

One of the functions of a business dispute lawyer is to guide you through the process of dissolving your businesses partnership with a clear head, and keep you focused on what can and cannot be accomplished. Lawyers almost certainly cannot get you back together. We cannot make you forget that your partner cheated you. Business dispute lawyers can, however, help you focus on the future and on minimizing the damage which business disputes and the breakup of a business partnership can cause. It is always better to know your legal options early rather than after a breakup has happened. For example, if you think that your partner is cheating you, you should get legal advice before confronting your partner.

For example, is it better for the stronger of two partners to spend his time fighting over what is left of the dead business, or to concentrate his time and money on a new business? The answer is that it is always better to move on as quickly as possible, and that the stronger partner is always well advised to accept a small loss now in exchange for the future gain to be had when no longer tied to or distracted by the failed business relationship. Put simply: the partnership is over, and the question really is not “what should you have done?”, but rather “what should you do now?”

Business lawyers, like divorce lawyers, serve their clients very poorly if they do not force them to focus on the future, rather than on the past. Yes, you can go after the money your partner stole from you, and you should. But you should be pragmatic about it, too: the business relationship is over and cannot be saved. The issues therefore are about money, and should be addressed with the same cold-blooded objectivity as any other business issue. Have your lawyer focus on the business dispute with your partner, and you worry about your future business.

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