If not for the divorce, the business partners might still be together. The two men had scraped together enough money to open a small pool supply store, which they built over 20 years into a profitable chain of 65.
But suddenly things got ugly. In the throes of a divorce, one partner decided he needed cash fast. Hoping to sell his half of the company, he found a group of investors who wanted the whole business. The other partner didn't want to sell; he offered to buy his partner out for less than the partner wanted. Instead, the partner who wanted out persuaded a judge to order the partnership dissolved, the assets sold, and his former partner fired for interfering with the takeover.
Partnership disputes are nearly as common as partnerships. As the partners above learned, they often land in court. Better to avoid problems by anticipating what can go wrong and drafting a partnership agreement for all partners to sign.
Many partnerships fail to do this. In family businesses, for example, where decisions are often made informally, it's hard to imagine the tensions that plague thousands of other family businesses could ever crop up in yours. If you've just started a business, handling legal details may be far down on your list of things to do.
You may think any problems can be resolved amicably as they arise. However, partnerships wed personalities with goals and management styles that often differ markedly. One partner may want to sell out when the other doesn't have the money to buy. One may want to expand the operation dramatically, while the other would rather coast. If you agree in advance how to resolve these disputes, there's less chance a judge will have to sort it out.