27 Sep Business Partnerships – Planning Ahead
“We’ve been friends forever. We’ll always get along.”
“I don’t think we would ever fight about money.”
“We’ll just split everything 50/50.”
“My spouse can just take over the business if something happens to me.”
The statements above are just a few of the things I have heard over the last 8 years. Mostly from well-intentioned business owners who genuinely believe that there will never be trouble down the road with a business partner. I always hope that ends up being the case. But life happens. People’s goals and plans change. Sometimes a spouse gets a new job and needs to move across the country. Couples divorce. Family members may require care. A business partner may become ill or pass away. Very few of us intend to be in business with the spouse or family member of a business partner. But if you don’t plan ahead for a variety of scenarios, that’s exactly what could happen. The business could also end up in probate if you don’t make plans for what happens to the business beyond the death of the owners. That probate process could be lengthy and impact how the business is run in the meantime.
I always tell clients it is far better to plan now and agree on how the division of a business would be handled in case life circumstances change or you and your business partner later decide to go your separate ways. The ideal time to have those discussions is at the start – when you are forming your business and deciding on roles and responsibilities. The second-best time to have those discussions is any time before there is a disagreement.
These are important discussions to have with your business partner – whether that person is also your spouse or another family member, a long-time friend, or a person you don’t know as well. Those agreements then need to be documented in writing. This can be done in an operating agreement or bylaws (depending on corporate structure) or in a separate buy-sell agreement. Agreements not in writing are all too easy for different parties to then remember differently months or years later. Agreements in writing and signed by both parties should be a clear and accurate representation of what was agreed by everyone at the time. This can be helpful in the event of later confusion or a later conflict.
Most of the issues I see in this area come from business owners who either have nothing in writing or used fill-in-the-blank forms or do-it-yourself documents from the internet to start their businesses. These documents rarely if ever are sufficient, clear, or a complete picture of what is needed. Working with a business attorney in a proactive capacity can save you time and money down the road. Let’s talk about it. 918-938-1322; email@example.com
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