Succeeding in Your Business: From the mailbag: The case of the doormat partner

Most of the emails I get for this column are pretty straightforward. Some, though, come straight out of the daytime soap operas, positively oozing with bile and vitriol. Here’s a good one: “I am the co-founder/CEO of a seminar production company. I started a limited liability company with my partner two years ago. Unfortunately, the partnership is no longer working out. During the last year, we have had some challenges in regard to ‘control’ and the image of the business we want to acquire. The problem, I believe, stems from the fact that I was too generous and agreed to a 50/50 partnership from the beginning. My partner has taken advantage of that and has forgotten that it was me who invited her as a partner. I am always struggling with her in regard to decision-making and the order of business.

“She has manipulated situations in which she gained access of the business in her possession. For example, the business was registered at her home address, the bank book ended up in her possession because she located a bank near her home, the telephone is in her home and the post office that we have a box registered is near her home. In other words, she has taken over all aspects of the company. My partner has been very petty and whines a lot about being the first to speak at an event. She is always looking to impress others, wanting to be seen in public and letting people know she is president of a company. However, she has not been effective as a president of the company. Her letter writing skills have demonstrated only high school level. Her communications with our clients have led to confusion and ruined business relationships.
“I have decided that I want to dissolve the company. Is there any way that I can dissolve the company and keep the name? I feel that this idea has been mine and I do not want my dreams dying because of my partner’s lack of performance and inabilities.”

Boy, the bloom has really gone off the rose in this relationship, hasn’t it? Playing devil’s advocate, though, I have some tough questions for you:

• How well did you know this person before you made her your 50 percent partner?

• Who made her president of your company?

• Who allowed her to put the business address, bankbooks, etc., in her name?

• When her poor communication skills cost the LLC business and customers, what did you say to her?

• Who allows her to speak first in every public appearance?

• Since there are only two of you, the answer should be obvious.

Now, I’m not saying you’re at fault here — your partner sounds like one egotistical bird — but when partnerships go bad, it’s usually because of a failure to communicate, and it takes two to create a communication problem. I sense that you haven’t been nearly as assertive as a 50 percent partner has every right to be. In the interest of being professional — or just nice — you have allowed this person to walk all over you. With only a 50 percent interest in the LLC, she cannot do anything — I mean anything — without your approval, and you have to let her know in no uncertain terms that she is to do nothing with this business unless the two of you do it together.

If that doesn’t work, you will have to consider dissolving the LLC and going your separate ways. Most states have a procedure where if an LLC is deadlocked (the partners can’t agree on anything, so nothing is getting done), you can petition a state court to dissolve the LLC, and the court will determine who gets what LLC assets (such as the name). You should talk to an attorney and find out how much time and money that will take; court proceedings are never quick, easy or inexpensive, even if one party is clearly in the right. And there’s no assurance you will win the suit. In a dissolution proceeding, the court may go out of its way to ensure that the LLC assets are split equally, and you may not come away with the assets you really need to stay in business.

Short of dissolving the LLC, you can always make an offer to buy your partner’s interest in the LLC. If she agrees, you get to keep the name, although she will probably want the right to compete with you, and there isn’t much you can do about that at this point. Or, if the name really isn’t all that important, you can offer to sell your interest in the LLC to her for a small sum, say $1, strike out in business on your own and leave her to “twist slowly, slowly in the wind” as her poor management skills become obvious to the LLC customers.

The key question is: Who do your customers think is better positioned to continue providing services to them? If they agree you are the one who makes this business happen, and your customers look to you as their primary contact within the LLC, then you shouldn’t worry that your partner will steal business from you after you have parted company.

If, however, the customers view your partner as the driving force behind this business and perceive you as being merely in her shadow, then breaking up would actually be to your disadvantage. This business may have been your idea in the beginning, but she has taken your idea and made it successful, and the customers will follow her, not you, once you part company. If this is the case, maybe the best thing is to swallow your pride and let her be the star of the show, knowing that you’re getting 50 percent of the profits from her successful efforts in producing and marketing these seminars.

Cliff Ennico (crennico@gmail.com) is a syndicated columnist, author and former host of the PBS television series “Money Hunt.” 

COPYRIGHT 2020 CLIFFORD R. ENNICO 
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