Skip to content
Holmes Business Law
Holmes Business Law
215-482-0285
  • Home
  • Attorney’s & Areas of Law
    • Business Entities
      • Corporations
      • Limited Liability Company (LLC)
    • Business Purchase or Sale
    • Raising Capital & Investor Agreements
      • Promissory Notes and Debt Financing
      • Private Placement and Equity Financing
    • Business Contracts
      • Consulting Agreement
      • Employment Contracts
      • Independent Contractor (1099) Agreements
      • Website Terms and Privacy Policies
    • Copyright & Trademark
    • Hiring Employees/NDA/Non Compete
    • Succession Planning
    • Commercial Lease
    • The Right Start Program
  • About
    • Speaking & Events
    • Webinars
    • Client Testimonials
    • Privacy Policy/Terms of Use
    • Contact
  • Business Success Tips
  • Flat Fee Services
    • New Businesses
    • Existing Businesses
    • Dispute Resolution
    • Trademarks & Copyright
    • Succession Planning
  • 215-482-0285

How to Handle Critical Developments in Your Business Partnership

2/22/2022
 

Imagine this scenario: your business partnership is off to a great start. You and your partner get along and work well together. Your vision is aligned and you’ve knocked a few business goals out of the park already. And then one of you falls ill, or your partner has to move away, or another company offers to buy you out. What do you do?

We all know what happens to best-laid plans. Sometimes reality doesn’t work out as imagined, no matter how strong your vision and will. Nobody goes into a business partnership expecting it to go badly – hopefully, you’re excited and optimistic about your venture.

While you can’t anticipate everything that could possibly go wrong, you can cover the most common contingencies with a little bit of planning. Thinking about worst-case scenarios isn’t pleasant but it can actually save your business partnership in case of any unexpected turns.

You can start planning for the unexpected in your business partnership agreement. But even if you don’t prepare for the unexpected ahead of time, you can successfully work through many of these situations with a partnership agreement modification.

Depending on how well you and your business partner communicate, you could move forward with a partnership modification through mediation with a neutral third party or negotiation where you and your partner are each represented by legal counsel.

Creating a strong foundation in your partnership agreement will help you weather any storms that come your way. It’s important to get a personalized approach to your partnership since no two businesses face the same issues and risks. This is why templates often don’t work. A business attorney can look out for you and help protect you from these curveballs.

Handling Critical Partnership Developments
A business partnership is first and foremost a human endeavor. Business partners often act as driving forces, pouring their passion, efforts, capital, and time into the venture.

So when a partner’s circumstances change, that can dramatically affect your business. A strong partnership agreement will act as a guide for how to handle these situations.

In the absence of guidance from your partnership agreement, you and your business partner can sit down to negotiate new terms for how to move forward. Partners must be in unanimous agreement when making changes to the terms of their partnership.

  • If a business partner gets sick or moves away, they may not be able to contribute to your partnership the same way that they have up to that point. A managing partner may become unable to carry out the day-to-day management of business operations. You may have to find another business partner or step up your own efforts to keep up. If the partner had a lot of authority and decision-making power before, they may be better off playing a more minor role as a limited partner moving forward.

In many partnerships, profit distribution is based on each partner’s contribution to the venture. So when that contribution changes, you’ll want to change the way profits are divided as well.

  • A business partner may pass away or decide to withdraw from the partnership for whatever reason. Your partnership agreement should outline the procedures you’ll take in these circumstances. How much notice does a partner have to give before voluntarily withdrawing from the partnership? Do the remaining partners get a right of first refusal to buy the withdrawing partner’s share of the company? Will the partnership dissolve if a partner leaves or passes away? If so, what will happen to the business and its assets?

Similar complications may arise when your business partner is another company. Planning ahead of time can save you a lot of grief in these situations.

  • A business may run into production or supply chain issues. Nowadays the economy is more volatile than ever. What happens if a partner is unable to deliver on the terms of the partnership? Does the partnership dissolve? Can the partnership find another partner or supplier? What would this process look like?
  • What happens if a business partner goes bankrupt? This will affect your joint assets and debts, especially if the partner is a general partner. It’s absolutely critical that you properly strategize the structure of your partnership in your initial agreement. If your partner’s assets get frozen, that could affect the operation of your business.
  • What about bringing on new partners? You can plan ahead for when your business grows and expands by specifying how new partners would be onboarded in the future. After all, as your operation grows, it’s common to need greater resources.

Ideally, you and your business partners are on good enough terms to sit across from each other in a mediation or negotiation. But in some cases, communication between partners could break down. This could happen over time or after a single inciting incident.

If you’re unable to come to a unanimous agreement to amend your partnership, you may have to halt operations, dissolve the partnership, and litigate the division of assets and debts.

How to Handle Sales Offers for Your Partnership

A business partnership could be sold in full with the unanimous consent of all partners or in part, where a single partner sells only their share of the partnership.

Again, it helps to anticipate the sales process in your partnership agreement before any offers come in. By following your previously agreed-upon terms, you and your partners have a solid idea of what to expect. This can help the sales process go much more smoothly.
When presented with a sales offer for your business, you must usually meet with all the partners in order to vote on how to proceed. The rules around this process will change based on your partnership terms and which state laws apply. So a Pennsylvania business sale will operate under different rules compared to New Jersey or Delaware.

You will have to decide which assets will be sold and how debts will be handled in the sale. In addition, you will have to consult with a business advisor and appraiser to get an accurate idea of how much your operation is worth. Your business lawyer can help by referring you to the appropriate experts, negotiating for you, and protecting your interests in the sale.

Call the Philadelphia offices of Holmes Business Law now at 215-482-0285 or use our online contact form to get started on your partnership modification or sale.

Author

Sarah E. Holmes is a Philadelphia business attorney and strategist that helps start ups and established businesses looking to expand, protect their assets and increase their profits in an approachable, down-to-earth way. When you're looking for a business lawyer in Philadelphia, the Main Line or New Jersey, we can help.

Categories

  • Uncategorized

Archives

  • May 2022
  • April 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • June 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • May 2017
  • April 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013

HOLMES BUSINESS LAW, P.C.

​1515 Market Street, Suite 1200,
Philadelphia, PA 19102
___________________________
40 E. Montgomery Avenue
4th Floor, Ardmore, PA 19003
​

​© 2022 by Holmes Business Law P.C.
All rights reserved.

  • ATTORNEYS & AREAS OF LAW 
  • Business Entities
  • Business Purchase or Sale
  • Raising Capital & Investor Agreements
  • Business Contracts
  • Copyright & Trademark
  • Hiring Employees/NDA/Non Compete
  • Succession Planning
  • Commercial Lease
  • The Right Start Program
  • BUSINESS SUCCESS TIPS

  • ABOUT 
  • Speaking and Events
  • Webinars
  • Client Testimonials
  • Privacy Policy/Terms of Use
  • Contact
  • FLAT FEE PACKAGES 
  • New Businesses
  • Existing Businesses
  • Dispute Resolution
  • Trademarks & Copyright
  • Succession Planning

  • REVIEWS

​All site content is subject to copyright 2021 by Holmes Business Law P.C.
This website and its content herein constitutes attorney advertising.  Any content on this website should be construed as informational, not legal advice.  No information on this website is intended to create an attorney-client relationship.  Only a signed fee agreement between Sarah E. Holmes and the client will establish an attorney-client relationship.  Use of any information on this site is provided “AS IS” with no warranty of any kind, either express or implied.  Always consult with a licensed attorney in your own state for legal advice.