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    Oct 8 12

    When Business (Founding) Partners “Divorce”

    Newport Beach Law Firm

    How you go about handling the situation [of a business partnership
    split-up] can mean the difference between an amicable split, where you run the
    business as you see fit, and a messy divorce, in which you wind up losing
    money, clients, resources or other critical assets.

    In every end there is a beginning.
    When it comes to the founders of a business, there also ought to be an end. An
    amicable end.

    As Stephen Covey noted so
    adroitly, one of the keys to effectiveness is to “begin with the end in mind.”
    Accordingly, the founders of a business should structure and run the business
    with a clear commitment to their shared ultimate goals for themselves and their
    business. In the vernacular of business planning, this oftentimes is called
    “exit planning.”

    If you fail to “begin with the
    end in mind” and make legal plans to memorialize the end game for your personal
    and business relationships, then you likely will only enrich lawyers. So, when
    it comes time to part ways down the road, what steps should you be taking now?

    The Wall Street Journal
    recently addressed this subject in an article titled “Breaking Up (With a Co-Founder) Is Hard to
    Do
    .

    One key takeaway from the
    article is the “when and how” of exit planning. The best time to address the
    issue is when the business is founded. Consequently, the best way to
    memorialize the exit strategy in the event of the disability, retirement or
    death of a founder is through various legal documents created when the business
    is founded. For example, an Limited Liability Company (LLC) can use the LLC
    Operating Agreement, while a corporation may use its Bylaws or various
    Shareholder Agreements.

    Regardless, one thing is clear:
    do not bury your head in the sand. For every business, an “exit” will be
    required. As a result, you can either make plans now, or leave it up to lawyers
    to clean up (literally) later.

    Contact Meier Law Firm to discuss all of your Estate Planning needs. 

    Reference: The Wall Street
    Journal
    (September 22, 2012) “Breaking Up (With a Co-Founder) Is Hard to
    Do




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