What do you do if you and your 50/50 partner disagree?

 

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What do you do if you and your 50/50 partner disagree?

My partner and I are buying out our third partner and will thereafter be 50/50 co-owners. So far, we have always been on the same page with our decisions, but we want to be prepared for the eventually of a deadlock. How do we break a tie when there is just 2 of us?

What do you do if you and your 50/50 partner disagree?

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46 Replies to “What do you do if you and your 50/50 partner disagree?”

  1. Operating Agreement should be amended with the help of the lawyer.

    You can do lots of things / there are lots of ways to do this; just make sure you agree in advance and have it written down.

    As others have already said, for ownership interest this is “OK” but for decision making, you need to put a system in place to make sure the business is never paralyzed. It could honestly be as simple as creating a Board with one extra member whose sole job is to break ties. Whatever it is, put it in writing and agree in advance.

    Good luck!

  2. Our contract spells this out for us. If we have tried everything to resolve the disagreement and can still not agree then we hire a conflict resolution specialist/arbitrator. We already have the specialist decided on in the contract. That is worse case scenario.

    Since we have that in writing, the other thing is that we both verbally agreed to agree. If one of us feels strongly about something, we’ll work to figure out all of our options and pick the best one, but will ultimately agree. It sounds like a catch 22 but it works for us. I’d like to think we’re relatively fearless in that we’re both willing to accept the consequences of whatever decision we make—for better or worse.

    We also have a few mottos (in no order of importance)

    1. One for all and all for one
    2. Always be a little more than fair
    3. Fight for good work
    4. We work for ourselves so we can live better personal lives
    5. If we go out of business I will work at a gas station if I have to, a job is a job

  3. It’s like a marriage. Sometimes you have to put your foot down and others you have to remind yourself it’s a partnership.

    I don’t always agree with my partner, but we both know which battles are worth fighting.

    We also realize our strengths and weaknesses in the business and try and respect that.

    But we never move forward without agreement. Sometimes I have to convince him. Sometimes he has to convince me. But we never have a stalemate.

  4. One of you has to be the boss. Can still have 50/50 monetary split, but someone needs 51% for decision making.

  5. I did a 50/50 split and was told after never to do it again someone has to be in charge and if you’re both head strong the organization will get no where is what I was told

  6. I co own a business. When we disagree we talk about, “how strongly do you feel about this decision on a scale of 1-10”?

    It’s surprisingly effective because you can’t credibly bluff… If you say, “well this issue is a 10 for me” and then say it again and again. You’re obviously exposing yourself as being full of it, so you tend to moderate yourself when expressing the amount of conviction you have on an issue. Once you’re both being honest about how strongly you believe in things, most issues resolve quite easily.

  7. You should define this in your operating agreement. You can agree to meet after a period of time and discuss again, a few times if it’s necessary. If that fails then the proposing partner can present a business case to prove it’s in the best interest of the company, and if yes, then it passes, if no, it doesn’t. You can, and a lot of people do, resort to a coin flip instead.

  8. My dad and his brother co-owned a company for 20 years, had a CFO that was not a board member, and they gave him the tie break ability. In the 20 years it never got to the point of needing a tie breaker.

  9. List out each of your strengths. Partner will be better at some maybe he/she is the people person and maybe you are the ops person. If the decision is split differ to your predetermined strengths and know your weaknesses.

    It’s not easy and decisions aren’t mine vs yours they can be a compromise/combination if both.

  10. Our business is setup as 51/49 partly for that very reason. But we also have very specific roles outlined in an org chart and I make decisions when it comes to my areas (financials, marketing, website, new product development) and my partner makes decisions regarding their areas (customer service, fulfillment, operations). We often consult each other for advice, but I have rarely ever overstepped and just made a decision that went against what she wanted to do… I can’t think of a single instance right off the top of my head. Having the 51/49 is more of a control thing for me as I was previously a smaller owner (25%) and had virtually no control which ended pretty badly.

  11. 50/50 is rarely a good idea. I ensured that my business partner are 55/45% (his favor). Yet, I make most big decisions.

    He can always say no. But he usually prefers that I make the decisions.

  12. You can split profits down the middle, however, one of you has to be the CEO, who makes the final rational decision to benefit the company. If neither of you assumes this role, you will waste a lot of time discussing issues or ideas, and less time actually doing work to benefit the businesses.

  13. Why don’t you ask your third partner to retain a 0.1% stake to tie break?

    They will have knowledge of the business area and your business specifics.

  14. The best advice I have heard lately was in an interview with Gary Keller on the Tim Ferriss show ( [https://tim.blog/2019/12/12/gary-keller/](https://tim.blog/2019/12/12/gary-keller/) ). Keller suggested that agreements be called “disagreements” because you only need them when things are not working and they become the instructions of what to do.

  15. Give your accountant or lawyer 1% of the business or decision making ability. They will be objective and able to break deadlocks. Gl

  16. When I was in a similar scenario we had a consultant we worked with that was our tie breaker.

    She would ask me to clearly state my partner’s position until she and my partner agreed that I had done a good job of understanding and explaining it.

    Then she’d decide and we’d work with the decision.

    We also realized that it was much more important to decide quickly than always to be right.

  17. MATH!

    We always let the arguments get proven out. “If you’re so sure, prove it” was our motto.

  18. I had this problem in a past business. We developed a Sr. Management team(3 managers + 2 owners = an odd number, so there could not be a tie. Then we met weekly and brought all issues to the team for a decision. Problem solved!

  19. Make a formal/informal board of persons who have the right experience and wisdom. Use them for tie breaker

  20. I thought the comment about a mediator was a pretty good idea.

    I would also suggest you have this conversation with your partner and come to an agreement on what to do in that situation, then write it down.

    It’s common knowledge that 50/50 is bad, but if you have an agreement of how to deal with the situation you’ll be in a lot better shape. I don’t think it’s impossible to succeed in this structure, just it’s not as easy.

  21. Whatever person is more involved with day to day operations should be 51% and the other 49% then if a situation like this comes up the person with 51% can make a decision they feel is best for the business. You can change percentage of ownership with the bank and amend the operating agreement with signatures/dates.

    If this is to much just use the Rock Paper Scissors method.

  22. I worked with a very good mate of mine for 5 years before we eventually split the business and continued on our own separate ways.
    But for those 5 years we outlined who was responsible for which aspect of the business and we talked often about goals and obstacles. Clearly Define Your Role. That would be my advise and hold each other accountable for quarterly/yearly growth.
    That my 2cents worth!! 🙂

  23. Personally, I would set it up based on area of expertise. My own business has 5 partners, and two of us are the key decision makers (me on business strategy, financial, marketing, etc) and him on culinary, menu creation, events etc.

    So while we have 5 members, the likelihood of a tie falls if someone cannot vote (abstains), is low, but the Operating agreement says that we have tiebreaking power. We cannot overrule any majorities, but we can break ties.

    Also – everyone has areas of expertise anyway where 99% of things won’t require a vote. For that BIG 1%, this is where the rule comes into play.

  24. Dont be dicks, dont fuck each other, dont be greedy, and have your partner do the same and you will always come to a reasonable decision. Only problem is, this starts from day 1. You may have historical baggage which causes problems.

  25. Legal contracts, yes

    But it would be better to sit down with your partner and go over areas that you would disagree on — then agree to a solution of how to solve the problem and still work together.

    Whether it be rock-paper-scissors, a third party, a pre defined benefits/ pros-cons worksheet with a objective score — you have to still work together — so find a way in advance to solve these problems so that you don’t end up in court or hating each other.

    Been there done that—- especially when it involves money people get weird.

  26. Some good answers here. But when push comes to shove, if you are deadlocked, it means you no longer have accord. One of you should buy out the other.

    This can also be spelled out ahead of time. One way to do it is with a third person acting as an informal arbitrator. Each party gives the arbitrator a note with the price he’s willing to pay for the others half of the business, along with conditions — e.g. 20% of the purchase up front, and 10% on the anniversary for the next 3 years.

    If one party accepts, you have a meeting of minds. If neither party accepts then both have to make a statement of one thing that would make it more acceptable: “More money”, “More up front.” Both retire and make a new offer. If both parties accept, then the arbitrator flips a coin to see who buys out who, or allows them each to lower their offer.

  27. A partnership is like a marriage. If you’re both deadlocked, sometimes you have to let the other party win. Ideally, your partner will also have this same mindset, so you can sort of trade “wins”. You get this one, I get the next one. Sometimes you can come up with a compromise that is between what the both of you want. So while neither gets the “win” neither fully loses either.

    Obviously every situation is different, and can vary greatly depending on the severity of the decision. (i.e. What color to paint the front room, vs which of these two possible employees should we hire) But you both need to realize that you both can’t win 100% of the time.

  28. I have a 50/50 arrangement. My wife and I. We have been running for 6 years and all is good. We split the business into parts that each of us is responsible for, and generally keep out of the other’s way. When it comes to big decisions like company direction if we disagree we consult with someone who is more versed in whatever we’re considering and use their suggestions and knowledge to guide our decision. End of the day if there’s a deadlock, I, being the original founder make the decision… but it almost never comes to that.

  29. Me and my old partner used to get into some headstrong arguments and it concluded with him selling me his stake. 50/50 is more like a marriage and taught me a lot. Once we got complacent with our success, we each tried to do as little as possible, even though it was bad for the business. When I’d take initiative and he’d sleep in it would frustrate me and I had very little recourse besides starting to slack off myself. It started to get into a cycle that put the business last. It was near impossible to delegate new tasks or take on new responsibilities during this time. Our advertising and marketing became non-existent and we had totally different visions for the direction of the business.

  30. I started a 50/50 partnership 10 years ago. Knowing that I can be bullheaded, I suggested 50/50 so I didn’t steamroll my partner and make her miserable.

    Years later, I ended up always being the one to give in because she knew she could say no and deadlock us. We didn’t have an operating agreement (Yes, I have learned my lesson), so when she started causing problems and we decided to part ways, it took me 3 years to get out of this hell.

    Even with an operating agreement, I would never do 50/50 again. But you better have one. Find an attorney to help you draft it.

  31. Me and my former co-worker share 50/50 of shares which are capable of making decisions. The shares however are split into certificates. Those are shared at 40/40/5/5/5/5, with 4 colleagues. A certificate is entitled to a share of the profit.

    This means the colleagues with 5% do not have any real power, but when my partner and I disagree, we could consult them.

    If we would still not reach an agreement, we agreed to ask our accountant to force a decision.

  32. Don’t do it.

    ​

    if you think that it is the only way, just remember this quote:

    “don’t do it” – PecanTree march 2020

  33. You really need to have that spelled out in the operating agreement. My former business partner and I literally had a best of 5 1v1 Starcraft (Brood War) in ours.

  34. giving so small detail when asking an imporant question. is this 10.000usd or 1M usd company? finding common goals are sometimes easier. together create principles and vision for business on the mutual way. day 1 is where it starts.

    you can both agree on a **person** in experience which come with his own character to be a tie breaker and mentor. Since I cant know you business size this is hard to consider as a real mentorship session.

    Creating a team of experts for business decisions to be consulted. twice a month meeting of 3 experts for 2 hours for consultation on matters.

    you can handle it no problem.

  35. The way we do it in my business is we each have “departments” – – if we can’t agree, the person whose department it is gets their way. We have it in our partnership agreement and in 5+ years never had to use that clause.

  36. In my training and experience, one partner needs to have majority ownership.

    Another option is to assign majority rule in certain portions of your business based on experience or knowledge.

  37. You eat them. Jk don’t do that. Honestly best course of action is to start a relationship with them romantically. Feelings involved will help the disagreements become agreements.

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