The $300K Wake-Up Call: Why Business Partners Need Quarterly Check-Ins
As a business attorney, I see this story play out in my office more often than I’d like. What started as a complementary partnership ended with a quarter-million-dollar debt, personal liability, and two former friends who can barely speak to each other.
(*** This is a real story but not real names or client data***)
Sarah was the marketing genius. Her partner, Lisa, was the operational mastermind. Together, they built a thriving brand consulting business, helping mid-tier jewelry retailers navigate market trends, manage inventory, and grow their retail presence.
For two years, everything seemed perfect. They’d divided their client accounts 50/50, each playing to their strengths. Sarah excelled at trend forecasting and brand positioning, naturally earning higher commissions from her more successful client relationships. Lisa focused on operations and design, steady and reliable work but without the big commission wins.
Then the pandemic hit.
Instead of having a conversation about the growing income disparity or their different risk tolerances, they made what seemed like a logical decision: splitting the business into two divisions. Sarah would handle brand management and retail consulting. Lisa would manage the in-house design and inventory sold to third parties.
When jewelry sales unexpectedly skyrocketed during lockdowns, Lisa saw an opportunity. She took out a $300,000 EIDL loan for the company to expand inventory.
When the market reality set in and sales plummeted, that loan became a business-ending nightmare.
After a year of private mediation and mounting legal fees, they decided to dissolve the partnership. That’s when one partner came to my office. But here’s the legal reality that shocked them both: the SBA loan required immediate payment in full upon dissolution, or both partners would be personally liable for the entire amount.
I see variations of this story in my practice regularly. The legal consequences of poor partnership communication are real, expensive, and often devastating.
Preventive Law: Your Best Defense Against Partnership Disputes
In my practice, I always tell clients that the best legal strategy is the one that prevents problems before they need legal solutions. Regular partnership check-ins are essentially preventive law in action.
Here’s why quarterly conversations are legally smart:
They create documented agreement. Regular discussions about roles, compensation, and major decisions create a paper trail of mutual understanding that can prevent disputes later.
They surface authority issues early. That surprise EIDL loan? A quarterly financial review would have clarified who had authority to take on debt—and whether both partners needed to consent.
They address fiduciary duties. Partners owe each other legal duties of loyalty and care. Regular communication helps ensure both partners are meeting these obligations.
They prevent claims of breach. Many partnership disputes stem from unexpressed expectations. Regular check-ins force these expectations into the open where they can be addressed.
The 10 Conversations That Could Have Saved This Partnership
I’ve developed a quarterly check-in framework that addresses exactly these kinds of partnership pitfalls. These aren’t just nice-to-have conversations—they’re business survival tools.
Big Picture Alignment: Has anything shifted in your personal or professional goals? (This would have caught Lisa’s growing frustration with lower commissions early.)
Red Flags and Unspoken Issues: What are you worried about or holding back on? (The perfect space to address income inequality before resentment builds.)
Legal and Compliance Review: Do we need to update contracts, insurance, or review our operating agreement? (This could have prevented confusion about loan authority and personal guarantees.)
Succession and Buy-Sell Planning: What happens if one of us wants out or something happens to us? (A clear exit strategy could have avoided the debt acceleration crisis.)
The complete framework includes 10 essential topics plus a bonus conversation about market feedback—all designed to keep partners aligned before decisions become disputes.
Your Quarterly Insurance Policy
Ninety minutes every quarter. Ten structured conversations. That’s infinitely cheaper than litigation, mediation, and business dissolution.
As an attorney, I’ve seen what happens when partnerships fail. The emotional cost is devastating, but the financial and legal consequences can be catastrophic. The good news? Most of it is completely preventable.
Protect your partnership—and your personal assets. Download my free “10 Conversations to Have with Your Business Partner Every Quarter” tool below. These aren’t just business conversations; they’re legal protection strategies that can save you from costly disputes and personal liability.
Don’t wait until you’re calling a lawyer. Start the conversation today.
Download Link: 10 Conversations to Have with Your Business Partner Every Quarter
About the Author: Dawn Kennedy is a business attorney who helps entrepreneurs protect what they have built, including stronger partnerships which can often avoid costly legal disputes. More blogs and resources are available at https://dawnkennedylaw.com
Photo Credit: Photo by Antoni Shkraba Studio: https://www.pexels.com/photo/symmetrical-image-of-people-arguing-in-an-office-6632532/