By On Your Terms co-founder Claire Bodle
July 2025
Starting out in business with others is exciting. But sadly, not every partnership ends in a successful IPO. You’ll face tough business decisions together, and a family or friendship foundation doesn’t guarantee alignment. With no rule book to follow, you can end up in dispute, legal battles, financial ruin, or personal heartbreak. Below are some examples of how business partnerships can go wrong, highlighting the importance of protecting yourselves from the get-go!
See our customisable Shareholders’ Agreement and Company Constitution, Director Indemnity Bundle, Terms of Trade, Shareholders’ Resolution to Appoint Director, and Independent Contractor Agreement.
Also, see our blogs: Your Top 10 Questions on Shareholders’ Agreements Answered, Why Business Prenups (aka Shareholders’ Agreements) are Essential, and Do I really need T&Cs?
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The Tech Startup Betrayal
The Story:
Sarah and Steve co-founded a mobile app company that started with a bang. Sarah handled development, Steve was the marketing genius.
Then Steve was approached to sell his shares, but the buyer wanted Sarah (with her development skills) to stay on. Steve secretly negotiated a deal to sell his shares and didn’t tell Sarah.
Sarah was understandably livid when she found out. Steve walked away with a huge sum and Sarah was left with new shareholders she had no interest being in business with. She left the business, and without her, it failed.
The Outcome:
Steve got rich, Sarah got shafted. Sarah and Steve’s relationship was destroyed.
Lesson Learned:
Have a shareholders’ agreement that makes it clear what happens if one of you wants to sell your shares, eg, requires you to offer them to the other shareholder first, and/or includes tag along rights giving the other shareholder(s) the opportunity to sell also.
The Ice-cream Franchise Debacle
The Story:
In 2022, two childhood friends, Sam and Tim, opened an ice-cream franchise. The idea was simple: Sam had the money, Tim had the time and operational experience. Business boomed. But within a year, things got messy.
Sam accused Tim of micromanaging and trying to bring in his family to "help" without consent. Sam claimed Tim was ‘borrowing’ money from the cash drawer. They stopped speaking except through lawyers.
The Outcome:
The business collapsed under legal fees and mistrust. They sold the franchise at a loss. Their lifelong friendship never recovered.
Lesson Learned:
Friendship alone isn't a foundation for business. Create clear roles, the right contracts, and separate emotions from operations.
Family Connections in Ruin
The Story:
Two brothers-in-law started a home renovation company. At first, business was steady and they felt comfortable trusting each other to make decisions. But they soon realised they weren’t on the same page about everything – what they could claim as company expenses, which subcontractors to use, how much time-off they should each have.
The tipping point? One partner bought a truck under the business name and used it exclusively for personal use. The other confronted him, and things escalated into a physical altercation at a job site.
The Outcome:
They dissolved the business in a bitter dispute. Their wives (sisters) stopped speaking to each other.
Lesson Learned:
Never skip formal agreements just because you’re family. Set business boundaries, no matter how close the relationship.
The Café Crisis
The Story:
Lucy and Keira opened a boutique café together, both passionate foodies with complementary skills. Lucy handled creative direction; Keira was the finances guru. But when Keira discovered some serious overspending and they realised their priorities for the business didn’t align, the dream began to unravel.
Lucy admitted to using company funds for personal expenses, that she intended to repay when she could. Keira demanded immediate repayment. Lucy was offended by Keira’s mistrust, they argued and fell out.
The Outcome:
They closed the café. The staff went unpaid for a month. Both took a hit to their reputations in the local business community.
Lesson Learned:
Financial transparency is non-negotiable. Use accounting software, involve a third-party bookkeeper, and never assume you'll approach issues in the same way without talking about it first.
Final Thoughts
Business partnerships are like marriages, filled with potential but vulnerable to conflict, ego, and unmet expectations. Before going into business with someone, even if it’s your best friend, family member, or spouse, discuss the important issues, get a shareholders' agreement and constitution in place and define roles.
Trust is great, but contracts are better.
Claire Bodle
Co-Founder / On Your Terms
Claire has been a business lawyer in New Zealand and overseas for over 15 years. She is strongly focussed on using legal technology to deliver better legal services for Kiwi businesses.