There are plenty of things that drive business partners apart. Changes in company vision, the desire to pursue new endeavors, and financial strain are among the top. While business and contract disputes happen, no one wants to imagine that their partner would be convicted or accused of a crime.
Unfortunately, that’s a reality for all too many entrepreneurs each year. Whether it’s hidden skeletons in their closet, shady business practices, or rogue crimes, your partner can place your organization in jeopardy. Here’s what to do when a business partner is convicted of a crime.
The Damage Done
Once convicted, your organization face various challenges that could crush your efforts altogether. Your reputation is the first to take a hit, especially once the crime is publicized. Not only will consumers look down on your brand, but you’re likely to lose investors as well.
With your partner being jailed, they’re unable to contribute anything to your efficiency and work distribution. This is especially traumatic when the company runs on just the two of you. You’ll have to evaluate if the operation can stay afloat without them.
Liability is also a top concern. You or your business could be help responsible depending on their crimes. This is a sure-fire end to your startup, especially with the cost of legal fees and court dates. If liability is a factor, your reputation may very well never recover.
The first step to cutting your losses is, unfortunately, getting rid of your partner. This depends on the type of business relationship you formed, however. LLPs, LLCs, and corporations can often see partners distance themselves with the help of legal professionals.
If yours is a general partnership, then get ready for liability. Depending on the severity of the conviction, you may need to hire a lawyer. Regardless, an attorney is your only hope of proving innocence. Your business, on the other hand, might not be able to get off the hook if their crimes involved any aspect of its operation or finances.
When They’re Found Innocent
If the conviction is a small one, then consider yourself lucky. There are a few things you need to do as the more reliable partner, though. First, demand change. You need to see improvement and help them create a plan to avoid making the same mistakes.
Next, limit their duties immediately, especially those that may have been tied to the crime. If these cannot be done, then it’s time to file a lawsuit against your partner and fight for ownership of the business as well as compensation for any damages or loss.
If your business contains a number of partners, you could also expel the guilty party though a unanimous vote. All of these options should be considered before abandoning your business altogether. Unfortunately, that is sometimes the only option left for the unfortunate entrepreneurs whose partners were convicted of a serious crime.