Slow Dancing in a Burning Room: Why 50/50 Partnerships Need Tie-Breaker Clauses

Key Takeaways

• 50/50 ownership structures create inherent deadlock risk. When governing documents require unanimous consent without a dispute-resolution mechanism, even routine disagreements can stall operations and erode enterprise value.
• Tie-breaker clauses are critical governance safeguards. A clearly drafted deadlock-resolution mechanism, whether a neutral third party, casting vote, or structured escalation process, keeps the business moving and reduces litigation exposure.
• Address control and exit mechanics at formation, not during conflict. Negotiating tie-breaker and buyout provisions upfront protects relationships, preserves continuity, and prevents costly judicial dissolution or forced buyouts later.

A business owned 50/50 may seem like the fairest partnership structure, with each partner having an equal say and stake in all decisions. However, this structure often leads to gridlock during the first real disagreement. Then, the partnership starts to feel more like, in the words of John Mayer:

We’re goin’ down
And you can see it too
We’re goin’ down
And you know that we’re doomed
My dear, we’re slow dancin’ in a burnin’ room

The problem with a 50/50 partnership is that, without a way out, the partners may be stuck, leaving the venture “just waiting on the world to change.” This can be especially dire in the case of entertainment businesses where time is always of the essence and a deadlock between two partners producing a film or running a record label could risk killing the project forever.

When documents require both partners to say “yes” on meaningful decisions and there’s no path to resolve a tie, the venture has built-in paralysis. A deadlock isn’t dramatic at first; it’s quiet. A decision doesn’t get made, then another, then the business starts living in the gap between what it could do and what it’s allowed to do.

Why 50/50 Ownership Structures Create Deadlock Risk

To avoid a stalemate, consider the following alternative mechanisms:

• Add an odd-numbered decision-maker group (a three-person board/manager slate) so there is always a way to reach a decision.
• Separate economics from control (e.g., 50/50 economics, but one party is the managing member or holds a narrow casting vote for defined topics).
• Skip 50/50 ownership entirely when the business reality already has a “lead” (51/49, or other allocation that matches who is actually steering).
• Build in buyout clauses that allow one of the partners to buyout the other upon a deadlock (this risks the better-funded partner perpetually getting their way).

Each of these solutions has drawbacks, and partners often still insist on 50/50 control (and a full explanation of each of those mechanisms is better left to separate articles). If you are going to do a 50/50 partnership, it is essential to treat the deadlock/tie-breaker mechanism as a core part of the deal, negotiated and documented in the operating agreement/partnership agreement/shareholders’ agreement. The key is to keep the business moving forward and prevent a stalemate from quietly wrecking the venture.

How a Tie-Breaker Clause Prevents Operational Paralysis

When both sides know that refusing to compromise triggers an extra-judicial process, people tend to get practical faster. The paradox here is that having a tiebreaker mechanism often ensures that a deadlock doesn’t happen.

In the entertainment business, where time is money, the simple tie-breaker mechanism in a 50/50 venture often facilitates partners’ confidence in voicing all of their opinions and concerns (“say what you need to say”), knowing that a tiebreaker can save them if they hit a deadlock with each other. The freedom such a safeguard creates often prevents it from needing to be used.

Tie-Break Clause Example Language

Below is a simplified example of the core language of a tiebreaker clause that can be included in some entertainment industry 50/50 joint venture agreements:

Tie Breaker. In the event of a deadlock regarding any Creative Differences or Major Decisions, the Members agree that [NAME OF TIE BREAKER], an individual on whom the Members have mutually agreed (the “Tie Breaker”), shall cast the tie breaking vote after consultation with the Members (the “Tie Breaker Process”). If the Tie Breaker named herein will not serve or fails to continue to serve as the Tie Breaker, then the Members shall mutually agree upon and appoint a new Tie Breaker. The Tie Breaker’s decision on all matters shall be final and binding on the Parties.

Tie Breaker Process. If the Members are unable to reach a mutual agreement on any matter relating to Creative Differences or Major Decisions (a “Deadlock”), either Member may, by written notice (email being sufficient), invoke the Tie Breaker Process. Following confirmation of the Tie Breaker, the Members will work with the Tie Breaker to mutually agree upon a time and place to hold a meeting. At such meeting, each Member will have the opportunity to present their respective positions to the Tie Breaker. Each Member shall cooperate with the other Member and the Tie Breaker and provide such information as the Tie Breaker may reasonably request. The Tie Breaker shall review the Deadlock and the positions of each Member and shall render a written decision in reasonable detail resolving the Deadlock and deliver such written decision to the Members either at the meeting or as promptly as practicable thereafter, given the circumstances (as reasonably determined by the Tie Breaker).

Creative (and Risky) Tie-Breaker Mechanisms

Some “creative” tie-breaker agreements have had the ties literally determined by a coin flip, resolved by their college professor, and, in one case, decided by the outcome of a paintball battle.

In a 50/50 venture, especially in an entertainment business where time can kill projects, partners must design and negotiate a tie-breaker mechanism before signing their governing agreement. They must agree to abide by the outcome, whether it’s decided by an expert, a coin flip, or a paintball fight.

For more information, please contact a member of AGG’s Entertainment & Sports team.