Evil Partner

January 20, 2007 7:25 AM

How do I deal with a business partnership dissolution that is rapidly getting incredibly ugly? (Both emotionally and legally.)

Two years ago, I bought 20% of a business (corp) from the then-only owner. Over the past six months, her behavior to me and the employees became increasingly erratic and verbally abusive. I chose to end the partnership, consistent with the terms of our contract, which states that she must repurchase my shares.

Because I felt that it might smooth the process, and I wanted to encourage her to pay me via a lump-sum rather than over the 10 years allowd by the contract, I asked her to make me an offer.

Well, her offer just came through and it's for less than half of what I originally paid. Moreover, her offer includes veiled accusations of financial malfeasance on my part, and veiled threats. All of this is complete crap, which I can substantiate. She's also alleged that I reduced the value of the company (despite the fact that an independent appraiser disagreed).

I hate this woman. I am burning with anger. I want to make her life as difficult as possible, legally of course. On the other hand, I realize for my personal sake, I would be better off behaving professionally and letting my representative (family attorney, unfortunately not licensed in my state but well able to negotiate on my behalf and help me avoid litigation) negotiate with hers.

In the meantime, though, I supposedly have a week and a half more of work, wrapping up projects and ensuring a smooth transition. I am not going to be able to be in the same room with this person, let alone work with her, primarily because she impugned my ethics-- I already knew she was greedy and a bitch.

What do I do? If she's going to end up giving me nothing (or virtually nothing), why should I make this transition smooth? On the other hand, I would like to receive my last paycheck. And, how do I get out of this without having a nervous breakdown? I can't sleep (been up since 4), eat, or relax.

Help! I realize there are a couple of issues here-- the legal partnership issues are being dealt with, I think, but I am concerned about slander as well, if she tells people these lies about me it could significantly damage me. I feel like I am being blackmailed, to be honest. (Note the numbers here are fairly small, in the 10-30k range, so litigation is really to be avoided.)

But...what do I do? How do I deal?

posted by anonymous to work & money (15 answers total)

First thing, you call a lawyer who is licenced in your state, and is a specialist in business law, not a family attorney, and you do it right now.

Second, you don't give her a single thing that she can possibly use against you. Arrive on time, do everything that needs to be done, and document everything.

Third: see step 1, and do it right now.
posted by dirtynumbangelboy at 7:45 AM on January 20, 2007

taking the high road always pays dividends.

as for the personal frustration, hey, life is frustrating, and sometimes we aren't as strong as we hope to be! the best thing to do is close your eyes, take some deep breaths, and truly let things slide. then set out to find ways to improve your well-being. that is far more important than any legal resolution. good luck to you.
posted by phaedon at 8:09 AM on January 20, 2007

Let it go. Chalk it up to experience. Stewing in anger and hatred only makes you a bitter old pill; it doesn't really affect her at all. Since the money is not all that is between you and starvation, is is enough to develop an ulcer about? A heart attack? No, it isn't. Save your health and your sanity and just walk away.
posted by acorncup at 8:50 AM on January 20, 2007

It sounds from what you say that the legal stuff is going to work out. Either she gives you a lump sum you can live with, or you exercise your right under the contract for re-purchase over 10 years.

The rest of it -- you just need to live through it, get through the last couple weeks. If she says shit about you, people probably aren't going to believe it; if it keeps going you can get your lawyer to write her about the legal risk of slander and telling her to shut the f*ck up. If she doesn't pay you your last paycheck, you have remedies either through small claims or your state labor department.

So try to let it go in the moment until you are finished there, and think to yourself that if she does anything really bad you will deal with her through the appropriate channels.

This is just common sense advice -- not legal advice.
posted by ClaudiaCenter at 9:02 AM on January 20, 2007

I agree with all the advice given above. Please understand that you will be proud of yourself in the future. Be the bigger person and don't let your anger and hate make you do something you will truly regret. I suspect her slander, as you call it, is just her anger. You can handle that by legal means if it gets to that level. Just finish your time, take your check and thank god you are away from the stress.
posted by JayRwv at 9:08 AM on January 20, 2007

In difficult circumstances, it helps to seperate issues, and deal with them one at a time, rather than wrestle with a big ball of seemingly inseparable issues. Let's try that methodology here.

If you bought into the business as a minority partner, your options are pretty much reduced to those you agreed to under the 10 year repurchase clause of your original purchase and sale (or partnership) agreement, or what you can negotiate in its place. You're upset because the net present value of what you've been offered is less than 1/2 what you paid, but bringing the 10 year stream of payments to which you're entitled back to a Net Present Value (NPV), that's not far off, if your re-purchase clause didn't include an interest and value accelerator. What she's offering you seems like it could be the NPV of the stream to which you're entitled, and which she's agreed to otherwise pay you, over 10 years. And in her mind, since your money might not have been put into her personal bank account, but used by the business to pay your salary, or do other things to expand the business, you taking off now, and requesting your money as a lump sum could well be putting the business in a cash crunch, and have reduced its book value to another buyer.

In other words, it wouldn't be too hard for her to make a pretty compelling case to an arbitrator or judge that the lump sum offer she's made you is fair and reasonable. So, take that into consideration, against the most optimistic view of what you'd hoped to get, which was 2 years of employment (if I read this right) and all your investment money back as you leave, which would basically, to her, be giving you a risk free return of your capital, and 2 years of salary, for the pleasure of your company and whatever your work product value has been.

Your personal/professional options here may also be limited by your initial purchase and sale (or partnership) agreement, in the case you don't accept her lump sum offer. Those options may be basically a) stay, however hateful your daily existence will be, or b) go, however much it costs you. Those are fairly standard options for minority partners, since the majority partner continues to have the greater risk exposure, the greater capital cost, and wants to retain the operating control of the business, which includes the right and obligation to make sure the business survives in the case of a minority partner leaving (or, from the majority partner's perspective "flaking out"). It sounds like, emotionally, you're already taking the b) option, but you might, as a negotiating tactic, simply get an ice water for blood transfusion over this weekend, and announce, placidly, on Monday, that you've completely re-considered, and will be staying 8 more years, at which time, your shares may once again be for sale, depending on market and business conditions at that time. The prospect of seeing your face regularly, even daily, for 8 more years, and of paying you salary, and perhaps paying you additional earnings or dividends through that 8 years, plus paying more for your shares in 8 years, if the business grows and prospers, may be so antiethical to her, that she ups her lump sum offer considerably, just to be rid of you. It happens.

It's exactly what I did 25 years ago, when I found myself in a similar collapsing sub-chapter S corporation, months after I and 3 other partners completed an LBO. After it became clear we weren't on the same page regarding operating goals for the business we'd just bought together, my partners at first tried to get me to resign and take short money for my shares. I lawyered up, shut up, and let it be known I wasn't going anywhere. And I went to work, and did my job, and was in their face, every day for 2 1/2 months. At which point, they gave me 3x my initial investment to go away, just to be rid of me. Tripling my money in 6 months kinda made up for the emotional bullshit I went through doing it, but 2 of those 3 people have died hating my guts. The other one and I haven't spoken in a quarter century, and are in a grim race to find out who will survive to piss on the other's grave. It happens.

So much depends on the particulars of your purchase and sale (or partnership) agreement. Lawyer up. Steel yourself. Hang tough, if you want what you consider "your" money.

'Cause sweet reason is out the window, and you're playing Who's The Biggest Asshole, now. Or, you're leaving with your better angels perched happily on your shoulder, and chalking your losses up to education and life experience cost. Maybe, it's still your choice.
posted by paulsc at 9:24 AM on January 20, 2007 [1 favorite]

Having been the bystander to a similar business meltdown a few years ago, I would echo the advice above. Although, I don't think I would "let it go" exactly. Get the appropriate legal advice and follow what is allowable by law to iron out the dissolution. Be the better person as much as you can. If you are in a client services situation then it would behoove you to go to your clients and inform them that you are leaving the partnership. But, again, I wouldn't do that before you talk to a lawyer. A message like that may be better coming from the joint partnership. You don't want to get accused of stealing business.

And, not that you need this advice, but for anyone else thinking of going into a partnership, you must think of it like a marriage. This person is going to become intertwined in about every aspect of your life and your career and this is a place of strong emotions and psychological stress. If you think of the partnership as "for better or worse, in sickness and health" you might look at it a little differently.
posted by amanda at 9:32 AM on January 20, 2007

I'd pop into an attorney's office for a quick consult. The 10-year repayment plan sounds weird to me and I'd want to make sure that you are not incurring any liabilities or obligations during that time.
posted by Saucy Intruder at 11:14 AM on January 20, 2007

If she's going to end up giving me nothing (or virtually nothing), why should I make this transition smooth?

Karma.

Or if you don't believe in karma, how about: Don't let her drag you down into the muck with her.
posted by tkolar at 12:10 PM on January 20, 2007

Take the 1/2. Lose the anger. Learn not to do this again.

Those three things are a damned good deal. You could lose ALL your cash. Anger will kill you. Optimistic stupidity will bankrupt you.

Do NOT go into business with anyone who is not already your champion, supporter, and also preferably a candidate for sainthood.
posted by FauxScot at 2:16 PM on January 20, 2007

There are companies that purchase annuities, settlements and such from people who want a lump sum up front. I can't personally recommend any or speak to their fees and percentages, but you might come out with more than the 50% she is offering, and make things gentler all around...
posted by iurodivii at 3:58 PM on January 20, 2007

Take the 1/2. Lose the anger. Learn not to do this again.

This is fantastic advice. It took me way too long to learn that one of the keys to success in business is to put your failures behind you as fast as possible and get on to the next thing.

Life is too short and there are too many opportunities to waste time trying to "get what you deserve" in a situation that hasn't worked out like you hoped it would. Even if you win, you've lost. Walking away is the only way to take control of what happens next. "Living well is the best revenge."
posted by fuzz at 4:11 PM on January 20, 2007

When you're trying to get to sleep, keep reminding yourself that the most important thing to be doing right now is sleeping. And whenever an angry thought comes up - or any time you catch yourself thinking about anything other than relaxing and slowing down your breathing - remind yourself again that the most important thing right now is to sleep.

Your partner, by the sound of it, is going crazy. If you sleep well, you're far better placed to deal with this shit than if you're sleep-deprived.

And lawyer up.
posted by flabdablet at 5:08 PM on January 20, 2007

Just an uninformed opinion, but lump sum doesn't appear to be smoothing the process, so take the full amount over the longer period. In a sense, that will also be sticking it to her because she'll still be paying you years from now, but really, let the anger go and just set it up so she has no wiggle room. Even if the company goes bust within a few years (quite possible with a bad person at the helm), you'd still get close to the 1/2 value lump sum. If it struggles on, you make extra money.

Better yet, if you decline her offer as "not serious" and require the full amount over the larger period, perhaps she will come back with a better offer.
posted by -harlequin- at 10:24 PM on January 20, 2007

I'd burn the place down. But taking the high road is always nice.
posted by fourcheesemac at 6:28 AM on January 21, 2007