One of the hardest things to do when you are in business with another person is breaking up your business partnership. But while it is typically unpleasant and often contentious to do so, it is often necessary to dissolve your partnership for the viability of the business to continue.
Your partner may be misappropriating funds or engaging in other conduct that makes it impossible for them to continue to be associated with your thriving business. The question that remains, however, is how do you legally disentangle yourself and your company from this partner.
Keep your actions legal and transparent
The last thing that you need at this juncture is to do anything that would give the disreputable partner a legal leg on which to stand to fight back against you. To avoid this, all your actions should be by-the-book and transparent.
First, review your partnership agreement. Ideally, when you entered into the agreement you included a clause for dissolving the partnership. If such was not the case, now might be a good time to address this matter with a New York City business law attorney.
Your case could wind up in litigation
While you may remain hopeful that your partner will agree to dissolve the partnership between you, the reality may be far different. Especially if they feel they are in the right, you can usually expect them to resist your efforts.
If the matter winds up being litigated, you will need to be prepared to present your case to the court. Here, documentation is critical, so make sure that your case is airtight. Receipts for certified letters (and copies of said letters), witness statements and details of the many ways in which your partner failed to honor the partnership agreement may all be entered into the record as evidence of their breach.
Consider a buyout
In some cases, your partner's (in)actions may have already done irreparable harm to the company. Under those circumstances, your best bet may be for your partner to buy you out before they run the business straight into the ground. You may want to keep this option on the bargaining table.
Alternatively, if you would like to keep at least a semblance of good will between you and your erstwhile partner (as is often the case where there is a familial relationship or pre-existing friendship) you might want to buy out your partner's interest.
If you choose the latter option, you will definitely need a signed release from liability that will protect you from any future claims against the business.
A final option might be to sell your stake in the business to a third party investor if your partner consents. An equity adjustment might also be arranged for a lucrative business when you go to sell.