Protecting Yourself in a Business Partnership
A conversation with a friend sparks the idea for a new business that you both decide to pursue, and before you know it you’ve entered into a partnership. Although this new venture is exciting, there are steps you should take to protect yourself in a business alliance. Our South Florida business attorneys are providing recommended precautions to be taken by those starting a company.
The sooner a contract/agreement can be drawn up between partners, the better it is for everyone involved. A partnership agreement will outline protocol to be followed in the event of a disagreement. Terms of the contract should specify the following.
Responsibilities and expectations for every participant in the arrangement must be clearly outlined, making it simple to recognize when a party is not meeting the agreed upon standards. This should include the jobs each partner is expected to handle and time allocated to the business.
Finances are often a stress point for business partners. All parties should be in agreement regarding the required financial contributions. The allocation of profits must be addressed, as well as the handling of losses. Explanations pertaining to the conditions in which it is permitted for parties to withdraw from the profits should also be included in the document.
The power granted to each partner must be determined as well. It is advised that specifications be made as to whether all accords are required to be made jointly or if one party will be given the ability for exclusive decision-making.
Proactively stating the steps to be followed in a disagreement between partners can prevent unnecessary litigation or closing of the business. The contract may indicate that all conflicts unable to be resolved between partners be taken to a mediator before further action is taken.
Discords that are unable to be resolved can lead to the voluntary or forced exit of a participant. Plans should be established to handle the occurrence of such events. Additionally, accidents can happen to anyone and must be considered in a partnership. An exit strategy should be outlined in the unlikely circumstance that one of the partners is no longer able to continue due to disability or death.
Terms should be laid out indicating protocol to be followed in the event that the company must be dissolved. This could include scenarios such as a lack of solvency or the partners no longer wishing to continue with the business.
Having the forethought to compile such an important document in the early stages will provide your company with a solid foundation from which it can grow. Experienced and knowledgeable South Florida business formation attorneys will provide valuable insight in the planning and drafting of an agreement. Contact the Law Offices of Kelley, Fulton & Kaplan today.