In your lifetime overall, and in your life as a business owner, you will be responsible for creating, reading, authorizing, and signing a wide range of contracts, from vendor agreements to partnership contracts. Such action begins when you found your company and form your corporation, LLC, or whatever type of organization or structure you have chosen. From there it may seem as if the contracts just never stop. If for example, you are opening a restaurant, once you choose vendors, they will be showing up with a multitude of contracts to be signed. Once you have decided on a site for your business, more contracts arrive in the form of real estate or lease agreements, insurance policies, and more.
The partnership contract, however, is one of the most important. Not unlike a marriage, the person you enter a corporate relationship with could have the ability to make or break your business—and your livelihood too. Conversely, this person—or group of people—could also be the catalyst for changing your life in every way as you put a successful business model into motion, create intellectual property such as the trademark and service mark, hire a team, develop marketing to bring in the clients, and so much more.
Strong partnership contracts can protect your business from ruin, as well as helping you to know what to expect in the future as the inevitable changes will occur. On inception of your company, the partnership contract should outline who is involved in the company and in what capacity. This means including their job titles, duties, and pay—especially profit distributions and what percentage they will receive, and when. These items are some of the most important as they help fend off disagreements or resentments later about who is doing what.
The partnership agreement should also detail exit strategies. While this may seem like an awkward subject to bring up, it is highly likely that there will be changes of some sort in the future—and especially if there are multiple business partners. Developing an exit strategy while everyone is still invested and getting along allows you to create a sound plan for handling resignations, buy-out strategies, and more, to include what happens if one partner dies.
And just as important is the dispute resolution clause, again, allowing for planning before anyone has ended up in dispute. Being able to plan ahead of time means deciding on whether to use litigation, arbitration, or mediation in the event of serious issues, along with deciding where such issues will be resolved—and who will pay attorney’s fees if there are any.
The Bolender Law Firm can assist you in all intellectual property matters. Call us at 310-320-0725 now or submit an easy consultation request online. We are here to help!