My best friend and I split our shop 50/50, but I do most of the work.

The question

An illustrative letter.

The answer

My dear, this is one of the most common troubles in small business, and one of the most painful, because it mixes money with friendship. You started this shop as equals, full of energy, and nobody wanted to spoil it with paperwork. Now the work has drifted apart while the money has not, and every late night alone at the press makes the resentment grow. The good news is that you noticed it while you still care about each other. That is the best time to fix it.

What happens when there is nothing in writing?

When two people run a business together for profit without forming a company, the law usually treats them as a general partnership, whether or not they meant to create one. Then the state's default rules fill in everything you never agreed on. Under Idaho's partnership law, unless partners agree otherwise, each partner is entitled to an equal share of the profits, and a partner is not entitled to pay for the work they do for the business. In other words, the rules that apply to you right now say your extra hours are worth nothing extra.

There is a second risk people rarely think about. In a general partnership, each partner can be personally responsible for the business's debts, including debts the other partner takes on. If you formed an LLC but never wrote an operating agreement, Idaho's default rules for LLCs apply instead, and they may not match how you actually work either. Either way, a written agreement replaces guesses with choices.

What are the fair ways to fix it?

There is more than one fair answer, and the right one depends on what each of you wants from the shop.

• Pay for the work, then split the profit. Many partnerships pay each partner for the hours or the roles they actually carry, at a fair rate, before the remaining profit is shared 50/50. You both still own half, but the person running the press is paid for running it.
• Change the ownership. If one of you will always carry more, you might agree a different split, such as 60/40, perhaps in steps over time.
• Divide the roles clearly. Sometimes the problem is that nobody said who does what. Your friend may be glad to own sales, bookkeeping or ordering, with clear expectations.
• Agree how either can leave. If your friend no longer wants to be in the business day to day, a buyout, with a fair way to set the price, may suit you both.

How do I bring it up without losing my friend?

Prepare first. For a few weeks, keep a simple record of the hours each of you works and what you do. Facts are kinder than feelings, because they let you talk about the business instead of about each other.

Then choose a calm time, away from the shop. Start with what you share: "I love that we built this together, and I want it to work for both of us for a long time." Describe what has changed, using your record, without blame. Then ask, and listen. Your friend may have reasons you do not know about, such as a new baby, a health problem or a second job. Or they may simply not have realized how lopsided things have become.

Bring two or three options to the table rather than a demand. People accept change far more easily when they help choose it.

What should go in a written agreement?

Once you agree, put it in writing with a lawyer, so it is binding and clear. A partnership or operating agreement usually covers who owns what share, who does which work, how each partner is paid for that work, how profits are split, how decisions are made and what happens when you disagree. It should also cover the hard questions: how either of you can leave, how the business is valued for a buyout, and what happens if one of you dies or becomes unable to work. The checklist further down lists these.

Many partners also consider forming an LLC at this point, if they have not already, because it can protect each owner's personal savings from the business's debts.

What if the talk goes badly?

Give it time, and try again. If you still cannot agree, a mediator, a neutral person trained to help people settle disagreements, can help you find terms you can both accept, at far less cost than lawyers fighting in court.

Can the friendship survive?

Many do, and often they grow stronger, because hard conversations handled kindly build trust. The friendships that end are usually the ones where nobody spoke up until the resentment was too large. You are speaking up now. Write it down, be fair to both of you, and give your friendship and your shop the solid ground they both deserve.

One thing to do this week

Start a simple record of the hours each of you works and what you do, so your conversation can begin with facts.