The Two Percent Solution

Two percent doesn’t sound like much but, when properly applied, can make a world of difference. A two percent solution of salicylic acid, for instance, will clear up blemishes and result in smoother looking skin. Interesting. But did you know that a two percent change in the ownership of an equal partnership can achieve similar results?  It can clear up managerial flaws and make for a smoother running company.

My previous post described how 50:50 partnerships can bog down, become stalemated; it’s an ownership structure steeped in initial optimism but one that seldom flourishes as circumstances change. Since change, as the saying goes, is inevitable, what can one do? There are many solutions to 50:50 ownership problems, solutions that maintain the partners on relatively equal footing yet allow for the resolution of voting stalemates, such as:

51:49 Split
The simplest approach is this two percent solution: Moving to a 51:49 ownership split in which one partner owns a slightly larger piece of the pie. Since the 51% partner will essentially control the vote, this solution is usually coupled with changes to the operating agreements such that there is a three-person Board of Directors or similar structure that prevents simple, “majority rules” voting.

49:49:2 Structure
This solution brings in a third partner to prevent voting splits. Under this scenario all critical decisions will require two of the three partners to vote similarly. Typically, it takes time to identify a suitable third partner, one who is agreeable to both parties. This works best when the third partner has relevant industry experience or is a recognized small business coach or advisor.

50:50 with Better By-Laws & Operating Documents
When it is not possible to bring in a third partner or to craft a 51:49 ownership structure, it may be best keeping a 50:50 partnership if the operating agreements are properly updated to address the handling of stalemate situations. Such structures can be cumbersome but, in certain situations, may be the only option that warring partners will accept.

Worldwide Local Connect, working with its legal partners, has helped many equal partnerships evolve and prosper. All have succeeded because they sought out assistance sooner rather than later. Once partnership disputes reach the stage of lawsuits and countersuits, it may be too late even for a two percent solution.

Want to learn more?  Contact me here.