What To Do When Your Business Partner Is Unable To Work


What To Do When Your Business Partner Is Unable To Work When two or more entrepreneurs start a partnership business, they should sign a contract that includes all the terms and conditions of the business. The contract usually states how the assets, profits and responsibilities will be shared by the partners. Basically, each partner contributes either skill, capital or labor and get a return as stated in the contract. A partner who contributes only property and no labor is referred as a “silent partner”. Irrespective of what your partners contribute and the responsibilities they share, it is important to sign a partnership agreement.

What to include in a partnership agreement?

  • Name of the company
  • Address of the company
  • Description of the business
  • Whether the business is for a specified term or ongoing
  • How much capital is contributed and by whom
  • How the profits would be divided among the partners
  • How the disputes would be resolved
  • Who would be the accountant
  • Who would be entitled to sign the checks
  • Procedures for withdrawing from partnership and admitting new partners

It often happens that a partner/partners are unable to work actively in a business due to some disability or other health reason. If the partner is unable to work for a short period of time, the other partner/partners can manage the work. However, if the partner is unable to continue the work due to some disability, then it could be time to find a new business partner.  It is also important that you take legal guidance when a business partner is unable to work. There are many issues which need to be settled.

Even after your business partner is unable to work, does he still retains share in the business? Does he have the right to withdraw salary? Does he have the right to share profits? Well, the answers to all the above questions lie in the buy-sell agreement that you sign with your partner. Remember, without a buy-sell agreement your business partner remains your business partner even when he is disabled. This also means that he remains a shareholder in the company and possess all the rights that a shareholder has. If for years your partner has drawn a salary, irrespective of how much work he did, then he’ll still be drawing a salary even if he is not actively involved in the business.

The buy-sell agreement must clearly spell out what must be done in case of a death, disability or departure of a partner. These agreements are often supported by life insurance or disability insurance. So, these policies can be used when your business partner is unable to work.

Now, even in the best of circumstances, the business partnership can be fraught with conflict.  In such a situation, you must learn to take command of a partnership that has gone bad. Usually, a well-drafted partnership agreement acts a guideline.  If you are wondering what to do when your partnership sours, just go through the agreement and learn to resolve the issue. It is important for you to figure out the friction and try to settle the differences.  Both the partners need to agree on the next course of action.

In case, you are unable to make any settlements, seek valuable advice from an attorney before deciding the legal course of action.  The  Watson Firm can give you sound advice on the legal issues and help you deal with partnership conflicts. Call 205.545.7278 or fill the form on this page to obtain sound legal advice from the experts.