Should I Fire My Business Partner | Signs of Bad Partnership

Delina Chantel Yasmeh
Published by Delina Chantel Yasmeh | Author
Last updated: March 25, 2024
FACT CHECKED by Lou Viveros, Growth & Transition Advisor
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Partnerships are mutually formed to accumulate capital, expertise and labor, with the common goal of sharing the profits of a business venture.

As with any relationship, conflicts and disagreements may arise from business decision, management, and performance.

As a Mergers and Acquisitions specialist who helped several individuals form their companies, entrepreneurs seek my guidance regarding business partnerships.

I’ll provide my insights on how to identify the signs that constitute a bad partnership and how to resolve the issue.

Quick Summary

  • You should fire a legal partner if there are major business issues that affect the firm as well as its client base.
  • Terminating a partnership involves legal action, and you must consider other methods to resolve the issue.
  • According to the U.S. Small Business Administration (SBA),  20-30% of partnerships dissolve within the first 5 year.
  • Before business partners decide to dissolve the firm, I recommend business counseling or legal intervention in order to retain the partnership.


7 Signs You Need A Break From Your Business Partner

If you are facing any of the following issues, then it might be time to part ways with your business partner.

1. Value Conflict

Alone outside with a box, fired by a business partner

Business values reflect the priorities of an entity with regard to its goals and operation. It may be motivated by profit, growth, customer service, or a combination of factors relevant to the partnership.

Any significant difference in value would create conflict in management decisions and impact the business, its client base, and the market network.

According to the U.S. Small Business Administration (SBA),  20-30% of partnerships dissolve within the first 5 year.

2. Lack of Communication

Openly discussing business strategies and sharing profitable ideas would benefit any partnership, and create a positive working environment [1].

According to a few of my clients, business partners who refuse to voice-out input may be regarded as indifferent to the goals of the firm, and counterproductive to the business.

3. Different Financial Acumen

Pointing out to fire business partner while holding document proof

The survival and growth of any business entity hinges on how the company’s finances are managed, allocated, and invested. Most disagreements arise from conflicting financial decisions and asset management.

In my experience, most partnerships terminate due to financial issues.

This is the reason why I advise newly formed partnerships to establish a written agreement that outlines the company’s financial management structure.

According to the U.S. Small Business Administration (SBA), approximately 15% of business partnerships experience such disagreements, which may arise due to differences in financial management styles, profit sharing, or investment strategies.

4. Lack of Work Ethics

In a partnership, the members should exhibit equal accountability, commitment, dedication and work effort.

Inasmuch as the duties and responsibilities of each party are indicated in the partnership agreement, problems may arise in the actual day-to-day operations of the firm.

"A partnership is more than a legal agreement between two parties; it's a bond of mutual commitment aimed at ensuring each other's success."

- Jon Morgan, CEO & Editor-in-Chief of Venture Smarter

5. Rigid and Not Flexible

If a partner is rigid and not flexible in terms of business innovations, the partnership may stagnate and be unable to keep up with the competition and common market trends.

Consumer demands are dynamic, and changes have to be implemented to keep your partnership updated and competitive.

Resolving the Issue of an Under-Performing Partner

If the partnership continuously poses conflicts regarding management, financial, and operating decisions, it may be ideal to terminate the business relationship.

However, your only option to relieve a partner requires legal action, that involves filing a complaint claiming unethical or poor performance of a business partner.

To avoid legal action, which may actually take years, you can resolve any conflicts through other methods:

  • Consult the partnership agreement: If a partnership agreement is in place, you may simply resolve the issue by consulting the specific provision that dictates the terms of settlement.
  • Business or legal counsel: You may seek the involvement of a third party such as a business consultant or a lawyer to objectively define the specific business conflict and offer legal settlement.
  • Buy-out option: You can offer to purchase the ownership interest of the partner and gain control of the business.
  • Dissolution: You may choose to dissolve the business altogether as a final option if no other settlement options are acceptable to both parties. I had a client who officially dissolved their partnership and distributed the remaining assets to start their own personal business.

FAQs

What Happens If a Partner Wants to Leave the Partnership?

If a partner wants to leave a partnership, the owners must follow the dissolution procedure indicated in the company agreement.

Can a Partner Dissolve the Partnership at Anytime?

A partner can dissolve the partnership at any time as long as a clause is indicated in the company agreement.


References:

  1. https://www.indeed.com/career-advice/career-development/importance-of-business-communication

About The Author

Author
Delina Chantel Yasmeh, J.D./Tax LL.M, specializes in Mergers and Acquisitions at Deloitte and PwC, managing billion-dollar transactions. Educated in Accountancy at California State University and holding advanced degrees from Loyola Law School, she is highly skilled in tax law. Delina also dedicates time to pro bono work for women and children.
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Growth & Transition Advisor
LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
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