Whether they are relatives, friends, or strangers who happen to meet or be introduced, two people often go into business together on a 50-50 basis. This situation is similar to a couple deciding to marry. In each case, the participants have stars in their eyes, foresee only future prosperity, and believe the union will continue happily ever after. Unfortunately, the record of business breakup is not very different from the rate of matrimonial divorce. The fact is that people, circumstances and attitudes change over time.

It is not failure but success that leads to business divorce. The workaholic becomes frustrated by the co-shareholder who, content with what has been achieved, leaves at five o’clock. The member whose contribution is “sweat equity” grows irritated by the fact that the co-member, whose contribution financed the limited liability company (LLC) at the outset, continues to enjoy 50 percent of the profits. The fissure in the relationship grows until the two can no longer speak civilly to each other let along work together. Each thinks of the business as his or her “baby”; each wants custody and the other gone. A business often cannot be divided. Either one must buy and one must sell, or the enterprise sold or liquidated and the proceeds divided. The alternative is unholy deadlock. If litigation ensues, the parties quickly discover that there is no such thing as a no-fault business divorce.

An Agreement

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