Business Partner – Don’t be Penny Wise and a Pound Foolish
Posted June 10, 2020
You and a business partner have a great business plan. You enter into a verbal or written agreement as to how you both plan to conduct and operate your business. 50-50 right? At least that’s what you thought.
Too often individuals starting a business relationship with a trusted partner or friend fail to engage attorneys to review proposed agreements. There may be many reasons for this. However, avoiding having to pay an attorney to help you negotiate terms of a partnership or operating agreement is not a good reason.
Using boilerplate agreements available on the internet or relying on verbal agreements can lead to disastrous results. There are many issues that must be negotiated in agreements with your business partner. Some of these issues include:
- who will manage the day to day operations?
- how and when will the distribution of profits be made?
- when will capital contributions be required?
- how will the contributions be allocated?
- what will happen to the equity interest of a partner in the event of death or disability?
- what happens if one partner desires to exit the business?
Failure to engage counsel to help you understand and negotiate the myriad of issues confronting the formation of business partnerships early on may very well lead to costly litigation with unfavorable results in the future.
As the old adage says, you can pay me now or pay me much more later. It is a choice and one you should not take lightly.
Please contact me, Pat Flanagan, if you have any questions about this blog or concerns about your business relationships.
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