Why you should have a partnership agreement in your business
How can someone avoid legal disputes between business partners? Some business partners ask the question of how they can anticipate and resolve legal disputes with a business partner before they ever happen. As a business owner that’s a great question because it shows command and control.
How to save your business money:
The first thing is, as you embark upon a business partnership, you’re getting to know your business partner better and better. One thing that you want to do while everybody’s on good terms and cooperating is to set your deal in writing so that everybody understands going forward what the rights and responsibilities of each partner are and also what the duties of each partner are. If you lay a good foundation, then you can build a great business on top of that foundation. Not having this foundation laid is one of the biggest risks that any business can face.
So, the sooner the better. One reason that taking action sooner is better is that with legal issues, as well as in life, you always have more options at the beginning of the relationship than you do if the relationship deteriorates in the future.
Dealing with things sooner gives you a lot more control over your circumstances. It gives you a lot more ability to negotiate and come up with a fair agreement with your business partner at the outset than at the end of that relationship. Plus, if you use a business legal counsel attorney to help you put your partnership deal in writing, the costs that you spend to put your agreement in writing using a competent business attorney will be a lot less than what you would pay with an attorney two years down the road when a dispute occurs.
So the cost of creating a partnership agreement from the beginning is substantially less expensive than the price of solving a dispute once it has come up. If you decide to protect yourself, your business, and protect your partner at the beginning, one of the best things that you’ll be able to do with your partner is put in writing your business agreement.
What kinds of issues does a business partnership agreement handle?
The kinds of issues that we can address in your contract are, for example, what would happen if there was a deadlock in the voting? If, for example, you and your partner are 50-50, how would you deal with a situation where you’re both well-intentioned, but you can’t agree on an important issue? We would discuss beforehand and put in your agreement the way you both want to go about resolving a deadlock. We can also address a situation with what happens if a partner wants to bring somebody else into the business.
You may know, like, and trust your partner, but not be as comfortable with a stranger that your partner wants to bring into the business. That’s something that you can address head-on and resolve in your agreement.
Another thing that your partnership agreement will discuss is the extent to which one partner in the business is allowed to engage in other activities on the side. Will the partner be allowed to engage in businesses that compete with your company? Or merely businesses that are non-competitive with your business.
You can also discuss the amount of effort and time and commitment that each partner is expected to contribute to the company. Along with that, you can resolve what each partner is going to add to the business. This is just a small list of the many things that you can consider sitting down with your partner and putting in writing.
How our firm can help:
We recommend all of our clients that once they’ve stepped into the business world to do things right. This includes seeking the assistance of an experienced business attorney.
An experienced business attorney is going to have an outside perspective and also a knowledgeable perspective based on seeing the types of patterns and situations that happen over and over again which lead to disputes.
An experienced business attorney will help a company crystallize their goals and priorities. This can help you weed out any differences between your goals and priorities and your partners.
Together, we can come up with a solution that best meets those goals and priorities. So if you’re a business owner who’s being proactive and resolving to build your business on a great foundation, give us a call.