Business Partners: For Better, or For Worse.

In business, it is rare to be a “lone wolf.”  There are many reasons why business owners have partners.  Perhaps you and your buddies came up with a great idea and decided to start a business.  Or, maybe you needed funding to launch your venture and found someone with cash that believes in you and your idea.   The decision to enter into a business partnership with someone should not be taken lightly and depending on what is at stake, can be as serious as entering into a marriage.

Unfortunately, many business owners are so excited about the adventure of starting and running their business that they forget to formalize the terms of their partnership. This could lead to devastating outcomes and even the demise of the business all-together.

In my practice, I have had the honor of helping business owners memorialize the terms of their partnership in a way that allows them to focus on building and running their business without worrying about what will happen if they need to “divorce.” I have also represented business owners in litigation involving partnership disputes.   Make no mistake: these cases are messy, expensive, and even messier when there is no agreement in place to govern partnership disputes.

 Depending on the type of business entity you have, a partner is referred to as a “shareholder” (for corporations), “member” (for LLCs), or a “partner” for (Limited Liability Partnerships or unincorporated entities). Each type of entity/partnership should be governed by a specific agreement. For example, a “shareholder agreement” governs the partnership relationship in a corporation.

A partner agreement should be carefully thought out and not some “cookie-cutter” template you got from the web.  For example, meticulous planning should go into: (a) how and when partners can contribute funds to the company; (b) how/when partners are compensated, (c) how the business is managed; (d) who can enter into contracts or debt on behalf of the company; (e) restrictions on selling/transferring partner shares; and (d) how disputes are handled.  

Lastly, before entering into a partnership, a business owner should consider alternative working relationships, such as joint ventures or teaming agreements to “test the waters” of a potential partnership. These type of agreements govern the working relationship between persons (or businesses) and allow for flexibility in dissolving the business relationship in the event of a dispute.   The adage “try it, before you buy it” is very apropos.

If you have partners and have not memorialized the terms of your relationship, or if you are considering a partnership, call me for a complimentary consultation at (855) 267-4457 or email joseph@casaslawfirm.com.  

Web: www.casaslawfirm.com  

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