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How to End a Business Partnership with a Friend

Ending Business Partnership with Friends

So you’ve realized that the business you started with a friend is starting to get a little problematic. Maybe you and your friend are no longer seeing eye to eye about the business direction. Or perhaps the stress over the business is straining the relationship. No matter the reason, it looks like it is time for you to end the business partnership with a friend.

You would be surprised at how often this happens – up to 70% of all established business partnerships ultimately fail. Luckily, you’re not alone, and that means there are proven ways to end the partnership and minimize chaos.

But how do you end a business partnership with a friend without damaging the business, your reputation, and, if possible, the friendship? In this article, we’ll look at the best way to dissolve a business relationship. But first, let’s take a look at why business relationships fail.

Why Do Business Partnerships Fail?

Running a business is hard – and it’s even harder when you have to consult another individual every step of the way. Sometimes people get into business partnerships with friends, family, and loved ones because they anticipate that running the business will be as easy as running the relationship, and this is rarely the case. Here are some reasons why business partnerships often don’t work out.

Communication Issues

Everyone has a unique communication style. Some of us are more comfortable sending the occasional text or email whereas others prefer constant check-ins, phone calls, or in-person visits. If both parties don’t learn the other’s style of communication, it can quickly lead to disaster.

 Different Visions

It can be all too easy to overlook early differences in creative visions, but it’s critical to address them right away. You want your brand to have a defined identity, and if you and your partner have conflicting views, it’ll show up in the form of a chaotic or unstable brand, which is bad for business. Additionally, if one person consistently takes the lead without sharing the spotlight, this can create resentment.

Life Events

Sometimes a business partnership fails because of circumstances beyond our control. We’re only human, and that means we can’t anticipate every single thing life throws at us. Business partners in different stages of life will experience different struggles, and this makes teamwork extremely difficult. 

End a Business Partnership with a Friend

Once you’ve accepted that your current situation isn’t working, it’s time to make a change. The first thing you should do is talk to your business partner. Setting up an in-person meeting to discuss things is the first step in dismantling the partnership. Make sure to bring a recent business valuation to the meeting as well as a written agreement to close the partnership.


1. Practice Honest Communication

Remember, both parties must agree to terminate their relationship, so you’ll need to cooperate with your business partner even during dissolution. You must speak openly and honestly to your business partner, especially when things are ending. You both need to understand why the business failed or the partnership is not working out as well as what the next steps are. Feedback from your partner can help you identify where you fell short, and vice-versa.

Try not to place 100% of the blame onto your former business partner during the discussion. Like any other partnership, it takes two to tango, and you need to be accountable for your own achievements and mistakes that contributed to the process. Make sure your business partner feels heard and understood to prevent any misunderstandings.

TIP: Hiring a mediator for this meeting can help lower the tension and make business disputes easier to navigate. Mediators provide objectivity and neutrality in an otherwise high-conflict environment. They can help keep both parties calm and make sure that asset distribution is fair.


2. Be Willing to Compromise

Your former business partner may disagree with you regarding the future of the company you created together, and that’s where things get tricky. During the dissolution of the business partnership, you’ll both need to make decisions about the distribution of your company’s assets. This will require some negotiation, which is another reason why a mediator is a good choice. Keep your mind open and do whatever you can to keep negotiations civil and fair.

3. File a Dissolution of Partnership Form

The most important thing to do when ending a business partnership is to make the changes legal. First, you’ll need to fill out a dissolution form, which states that you’ve both terminated the relationship. These forms differ slightly by state, so make sure you fill out the right one for your location.

4. Notify Customers, Employees, and Others 

Notify others, such as customers, relevant property owners, and the IRS that the business partnership is ending. If the details start to get overwhelming, you can always consult the IRS website for a list of steps to take when leaving a business partnership.

5. Restructure Bank and Other Accounts

At this point, you want to restructure or close accounts to reflect the new business owners. This means that if you and your partner have shared bank accounts, credit lines, or vendor accounts, they need to be closed and reopened if possible. 

This is especially important for bank and credit accounts. As long as these stay in the names of the partners, both partners are responsible for any debts, overdrafts, or charges made. If you are the one leaving the business, you want to be certain that creditors won’t come after you if the business fails to pay any outstanding debts.


6. Repair the Friendship, If Possible

After you’ve dissolved the business partnership, it may be in your best interest to take some temporary space from your friend. Wading through file after file of legal paperwork creates stress, and that can put additional pressure on your friendship. While you’re separated, take some time to reflect on what went wrong. Think about whether the friendship can be salvaged.

After you’ve spent some time apart, if you feel that the friendship can be recovered, make a move and reach out to the other party. Although things may be awkward at first, you might be able to get back to square one. If not, you’ll have to come to terms with what happened and learn from the experience.


Starting a business with friends is sometimes a great way to go into business. But it doesn’t always work out the way you want. It’s not easy leaving a business partnership with a friend, but by taking the necessary legal steps you can do damage control and minimize negative impacts on the relationship. 

You must protect yourself during dissolution by backing up every step of the process with legally binding documents, just in case you ever have to prove anything or go to court. Overall, it’s possible to exit the partnership unscathed if you communicate professionally.

Ari Bratsis
Team Writer: Ari is a writer, blogger and small business owner based in Washington state.

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Article Categories:
Find Your Way · Grow Your Business · Leading Your Team · Your Mindset

Team Writer: Ari is a writer, blogger and small business owner based in Washington state.

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