the 5 d's of business - a must read for business owners
If you’ve ever started a business with someone you trust, I would bet this situation hits close to home. Both you and your partner are excited about the business, your ideas and timing feel perfectly aligned, and progress is accelerating at high speeds.
The last thing you want to do is be the one who hits the brakes and suggest talking about contingency plans if things go wrong. Other than being labelled as pessimistic, you might as well be jinxing the momentum, right?
I’d imagine it’s similar to a healthcare worker looking around during their shift and saying, “Ya know, we haven’t been that busy tonight! No ‘crazies’ have come in!” That’s a death wish.
But I’m here to tell you that you need to rethink and reframe that mindset. It is incredibly common for clients to come to us who have had incredible businesses, just for it all to fall apart because the business owners didn’t have a ‘what if’ playbook.
Let’s use a hypothetical.
Two friends start a company. They split ownership 50/50 because it feels fair. They pick a name, launch a site, land a few early customers. Energy remains high and they’re in that sweet spot where everything is scrappy but promising.
Fast-forward a year. The business is real now: payroll, vendors, bigger clients asking bigger questions. The stakes are higher and so are the rewards.
Then life does what it does to one of the owners. Maybe it’s a health issue. Maybe a messy divorce. Maybe a parent gets sick. Maybe one of them quietly wants out but doesn’t know how to say it. Maybe one of them just stops showing up the same way they used to.
It doesn’t even need to be as dramatic as those listed above. It can just be a one-degree shift in vision for the company. And now the two founders are staring at each other across the same business, each thinking some version of: Wait, what do we do now? Who decides? Who pays? What’s fair? What’s even allowed?
That moment is why we talk about the “5 D’s” of business. They may not solve all the world’s problems, but they are five predictable and common ways partnerships get tested.
So what do the 5 D’s actually mean?
1) Death
If one owner dies, who owns their share the next day? This is where a lot of partnerships get blindsided. The deceased’s ownership doesn’t just vanish. It usually passes to an estate, meaning a spouse, parent, or adult child may suddenly have a financial interest in the business (and sometimes even decision rights, depending on documents).
Some questions to answer now:
- Should the business (or the remaining owner) buy the shares back?
- How is the price set?
- How is it paid (cash, installments, insurance)?
2) Disability
What if an owner is still an owner, but can’t do the work anymore? Disability might mean a medical event, but it can also mean someone is simply unable to perform their role for an extended period. Here, we typically see this pressure point being one of resentment. One person is carrying the business, but the ownership split as though nothing has changed.
Some questions to answer now:
- What counts as “disabled” (and for how long)?
- What changes first: role, pay, distributions, decision authority?
- Is there a plan to buy out the ownership if the disability continues?
3) Divorce
How do we keep someone’s spouse from becoming an accidental stakeholder? Even if a spouse never becomes an operating partner, divorce can create a cash squeeze, force valuation conversations, and introduce outside pressure at the worst time.
Some questions to answer now:
- Can ownership be transferred to a spouse? (Usually you want the answer to be “no.”)
- If a divorce creates a claim on value, how do we handle buyouts or payouts without crippling the business?
- Do we require a spouse consent or similar protection up front?
4) Disagreement
What happens when we’re stuck, and we both think we’re right? This is the one founders don’t plan for because it feels insulting to bring up in the honeymoon phase. But disagreements are normal, especially when the business grows and the decisions get heavier. The “real” question isn’t whether you’ll disagree. It’s: How do we break ties without breaking the company?
Some questions to answer now:
- What decisions require both owners?
- What decisions can one owner make within guardrails?
- If we hit a deadlock, what’s the tie-breaker (advisor, rotating “chair,” or a structured “disagree and commit” rule with a review date)?
5) Distress
What if one owner hits financial trouble, or the business hits trouble, and it drags everyone else into it? Distress can mean business distress (cash flow, debt, covenant issues). It can also mean personal financial distress (bankruptcy, creditor problems) that creates risk around ownership. The goal isn’t to punish someone for having a bad season. The goal is to prevent the business from becoming collateral damage.
Some questions to answer now:
- What happens if an owner’s shares become exposed to creditors?
- Can the company/other owner buy back the interest to keep it “in the family”?
- If the business is distressed, who has authority to make urgent decisions?
Final Thoughts
Addressing these situations now are a simple way to keep life from hijacking a good business. You’ll be thanking yourself later by deciding the rules while everyone’s calm, writing them down, and revisiting them like you would insurance coverage or passwords.
If you do nothing else, schedule one meeting this month and walk through each scenario with the same question: “If this happened next week, what would we want to be true?” Answer that now, and you’ll buy yourself something every owner wants and very few ever plan for…peace of mind. If you need help navigating these scenarios, schedule a no-cost, no-obligation consultation. Click here to call now.
Cozza Law Group Business Law Blog
