partnershipLet’s assume that I (in a hypothetical sense) have an unique idea and my mentor shows interest in the idea and I decide to let him in on it, since he has a lot of experience with start-up companies.
Eventually we start the company and my partner gets a very rewarding percentage of the company, yet my part is greater, since the idea is mine and I’ve put most of the effort into it. He puts some money into the company to get it going but most of our funding are external.
After a year or so (me and my team, which we hired, have made a working prototype of the system and the development of the actual system is in progress) it turns out that this partnership is not quite working out.
How should one tackle a situation like this?
What if it were someone else, a friend perhaps, who was not fulfilling his role?
Can this situation be avoided?
This is kind of a hypothetical question but partly bases on actual events. I believe this is something that many people will and have come across and I feel like there should be a guideline even though I understand that each situation is unique.
I’m not looking for a too-bread answer but yet one which could cover a few edges of it.
Any partnership should have a clear legally binding contract with at minimum:
and on to your questions:
How should one tackle a situation like this?
If you have a good agreement with at least what is described above getting rid of a partner is relatively simple legally although possibly emotionally complicated; you just follow your agreement. It would of course be more polite and probably better to have a discussion saying you are thinking about that because you feel the its not working out and see if you can resolve it that way first.
If you don’t have an agreement you are basically down to a nice sit down where you explain your position and ask him to adjust his action or agree to dissolve the partnership. If that doesn’t work your resulting actions would depend on the partnership laws of your jurisdiction and or legal proceedings.
What if it were someone else, a friend perhaps, who was not fulfilling his role?
If it is a friend the only difference is that there is more emotional involvement. No legal differences. Even if you have an agreement you might decide to handle it differently; rather than relying on the agreement there is probably more likely that you can handle it without resorting to legalese and instead take advantage of the hopefully good communication history with your friend and work it out to maintain your partnership but resolve the issues. If you do decide to ditch them as per your agreement be aware that that could lead to friendship breakdowns depending on how you do it, how the feel and your relationship history. If you don’t have an agreement again you have to fall back on the partnership legislation of your jurisdiction and/or messy legal proceedings that may absolutely kill your friendship.
Can this situation be avoided?
It can be made cleaner and dealt with easier but ensure that you avoided entirely? No. The problem is you can’t know how a partnership will work out for sure in advance - especially over the long run - just look at divorce rates to see the proof of that. (yes marital is slightly different than business partnership but it has many of the same features). The best thing you can do to avoid it is to make a clear agreement so that everyone knows what is expected of them and makes plans for if there is a breakdown to rectify it as expeditiously and harmoniously as possible.
Dealing with a partner that’s not fulfilling his role is a hard thing to do. Sometimes he even doesn’t know that he’s not doing it’s job properly, but it doesn’t seems your case since you said that you already told him.
The idyllic answer would be to speak with him and check the list of responsibilities he has and how many he isn’t fulfilling right now. If that list doesn’t exist you should create it because one of the most important things in startups is defining roles. About his repulsion towards potential associates you may try to convince him so he doesn’t take part in associates selection.
If that doesn’t work or he doesn’t show a receptive attitude you will have a big problem because since he’s a partner and not an employee you can’t just fire him. A partnership is based in trust so you will have to convince him somehow.
I completely agree with answers above that you should have signed the agreement an it would have been crystal clear who does what, however I have a feeling that there’s is no such thing signed.
There are 3 types of things:
and usually the latter fail the projects and businesses. Since your partner has been longer than you in this area it might be worth having him as a safeguard against such thing, as even if he’s slacking in his duties - you only need to step on a single ‘landmine’ and your business is done for. Another thing once he is out chances are there is going to be some bad blood - so you will loose on all the connections he has for future prospects, I would weight it a lot before making any decision.
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