Tag: Business partnerships

buyout agreements

Buyout Agreements Should Be Airtight

As a business owner, you take on a multitude of responsibilities that may not have been part of the original starry-eyed dream; in fact, the world of commerce continues to become more complicated as human resources issues grow around the US, tax laws are ever changing, the economy is unpredictable, and the marketplace is fiercely competitive for most industries today. But what about issues within your own business foundation, such as partnerships? Whether you own equal parts of the company or you control most of it, solid business contracts should be created in the beginning.

The beginnings of any startup can be both an extremely stressful but forward-thinking time. Full of excitement and positivity for most, if you are working with one or more partners, it is probably like the honeymoon phase of a marriage in some ways. You can’t imagine ever dissolving your business relationship; after all, you are in it together. And partnerships in business do offer a wide range of benefits. You can share duties, share the stress, create products and services together, watch your company grow (not unlike a family), offset financial burdens as you work together in providing capital to the company, and set goals for the future. While the going is good, however, get that partnership contract in place, and cover all the bases—even if some of them may be uncomfortable in discussing what could happen in the future.

The partnership agreement should outline the typical basic structure such as who is involved and who will do what. Titles should be agreed on and included in the agreement, as well as payment and profit-disbursement structures. Even more importantly, there should be a concrete dispute resolution clause—and creating this while everyone is on good terms can be vital to the success of your business should there be a major falling out or even a lawsuit later. This allows you to discuss how a dispute would be handled, where, and even who would pay attorney’s fees. Along those lines, there should also be comprehensive clauses covering what happens in the case of dissolution and/or a buyout. Will you want the right to buy out the partner’s shares? Will they be able to hand down their shares to family members or others outside the organization? Just as the partnership felt like a new marriage in the beginning, dissolving or completing a buyout may feel strangely like a divorce. And you must work just as hard to protect your assets!

Along with having the business assessed properly for valuation, there will be significant paperwork to be handled by your business attorney. Keeping the situation as civil as possible can be key to everyone parting ways with success, and your lawyer acting as the negotiating party could be a vital part of this action. The key is to hedge your bets in the beginning and uphold your partnership contract to the end.

The Bolender Law Firm will advocate on behalf of clients through litigation, arbitration, or non-binding mediation. Our attorneys are experienced in representing clients in state and federal courts, at both the trial and appellate level. Call us at 310-320-0725 now or submit an easy consultation request online. We are here to help!

business partnerships

Business Partnerships: Five Reasons to Avoid Them

Making a go of it with a new business can be one of the most satisfying ventures one will ever experience in life—and in some cases, it may be one of the most terrifying too. Including a partner means you have someone to carry the burden with overall, as well as helping to supply much-needed capital—not only for start-up but in the critical months and first few years that follow also. There may be initial peace in knowing you have another shoulder to lean on, but as is so often the case, one or more partnerships could end up being perceived as a liability in the future.

Although you could become involved in one or more partnerships that are extremely valuable and long-lasting, consider these reasons to avoid taking on one or more partners:

  1. Two (or three) can be a crowd – this can especially become an issue if you began a business partnership with someone you have known for a long time, but the friendship becomes strained, for whatever reason. Working in a partnership may be difficult too when it comes to decision-making. You may find that you don’t really want to have to ask someone else’s opinion or gain their permission to implement something new in the company, hire or fire someone, or buy or sell inventory, real estate, or other items.
  2. Finances – as with a marriage, disputes over money can be one of the most common issues, as well as the reason for dissolution of a partnership – and something that carries on past the separation point and into the courtroom, with the possibility of litigation.
  3. Disputes regarding shares – while this could be an immediate threat, there is also the possibility for conflict or vulnerability later if your partner wants to sell their shares to an outside party or dies and leaves them to a spouse who you could then feasibly suddenly find yourself working with every day.
  4. Resentments over work duties – although this should be outlined clearly when the company is formed, resentments can build later if your partner feels like they are being asked to do too much, or like full-time employees sometimes feel – as if they are being compensated too little in return. This can become challenging in difficult times when everyone may be forced to take on extra duties and put in more hours for the good of the company.
  5. Differing visions regarding the future of the company – this may have been what brought you together with a partner, along with creating a specific, unique innovation to offer to the public. Visions and strategies can change as time goes on, however, and a serious divergence in planning for later can cause conflict you may not want to deal with.

Do you need legal assistance with a business dispute? If so, contact the Bolender Law Firm.  Our attorneys are experienced in representing clients in state and federal courts, at both the trial and appellate level. Call us at 310-320-0725 now or submit an easy consultation request online. We are here to help!

Business strategies

Business Strategies: Figure out Partnership Exits at the Beginning

While some business owners employ many different business strategies and some prefer to fly solo, many others find that their companies thrive with the boost of one or more partners; in fact, if you do have business partners, these could be individuals you have known for many years—and they may have been integral in helping to develop your business model, products, intellectual property, and more. The key to a successful business partnership is much like that of any relationship: communication is key, along with a clear outline of what is expected of everyone.

Speak to your business attorney as soon as possible about having partnership contracts drawn up, defining titles, delegated duties, and information regarding profits and how and when they are to be dispensed. Even more important though is the exit strategy. And although this might seem like a negative thing to be considering from the beginning, the reality is that many partners do go in different directions over time, and it is better to have a plan while everyone is on good terms. This gives stability for the future too, as everyone knows what the plan is should one partner or another wish to depart or sell their shares.

The exit strategy for partners should include establishing the value of the business and then giving one or more partners the right to buy out their shares if that was the agreed upon plan; otherwise, they may want to leave their shares to family members or sell them to individuals from outside the company—a move which could lead to surprising complexities for existing partners who may later wish they had taken the chance to buy out the exiting partner.

Another important quotient in the business partnership contract is a dispute resolution clause. Again, deciding on such details before anyone is angry or suing can lead to a much better outcome later should a dispute arise. Dispute resolution clauses can be extremely detailed, outlining what type of method would be used, whether litigation, arbitration, or mediation. They may also be used to indicate where the resolution would take place, and who would be responsible for paying any attorneys’ fees, should that be an issue.

Do you need legal assistance with a business dispute? If so, contact the Bolender Law Firm.  Our attorneys are experienced in representing clients in state and federal courts, at both the trial and appellate level. Call us at 310-320-0725 now or submit an easy consultation request online. We are here to help!