A person nearly always has some pretty large dreams when they form a business. If the business is one that will be owned by multiple people, it is vital that you make sure everyone has the same dream.
A marriage is a commitment between two people. Having developed a relationship over time, they are ready to say this is THE relationship they want to carry out for the rest of their lives. Unfortunately, many marriages simple do not make it. While there can be some traumatic reason for this such as a cheating spouse, the more common reason is people simply grow apart. The same can be said for a business.
A common business situation starts like this. Two friends come up with an idea they are enthusiastic about and decide to move forward. The friends put together a business plan, funding and so on. They then launch the business and commit themselves to the pursuit of that business for the foreseeable future.
As with life, the business is eventually going to run into choppy waters. The particular issues that arise can range from a lack of business and money to too much business and cash flow issues as well as many other things. The exact problem is irrelevant. What is relevant is the business reaches a point where fundamental decisions must be made above and beyond what the original plan encompassed.
At this point, the owners may have the same solution in mind. Often, they do not. When they feel differently, a divide can be created between the owners much like two people growing apart in a marriage. As time passes, the divide can heal or fester. When it continually festers, you will eventually be facing divorce.
Divorce in a business entity is much like that in a marriage. There is a totaling up of assets and income and then a division of the same. The problem, of course, is most businesses can’t survive such a division. The only answer is a cash settlement of some sort that will be agreeable to the parties. Usually, nobody is happy with it.
Is there any way to avoid this situation? Not really. You can use buy-sell agreements and the like, but a split is a split. The best approach, in my opinion, is to realize that when you enter into a business with other people, you are essentially agreeing to marry them. In some cases that can be good. In others, it can be bad.
Richard A. Chapo provides
California incorporation services. Contact him at SanDiegoBusinessLawFirm.com.
