Tag: Partnership contracts

partnership contracts

Partnership Contracts in Business—How to Avoid Disputes Later

Every business is different, but one central theme prevails in all: you cannot do it alone. And while many business owners may be able to create and start up a business by themselves, there is usually a strong team put quickly into place, responsible for a variety of different tasks—from customer service to accounting to human resources. For one reason or another though, you may be founding a new company with one or more partners on board. Many entrepreneurs find this a healthy way to enter the business world, brainstorming and innovating with other like-minded individuals, as well as being able to share responsibilities for startup capital, the workload, and even some of the stress and anxiety involved.

You May Spend A Lot of Time with Your Business Partner

In a partnership, you have one or more business peers to lean on, whether that is financial or not. The relationship can be like a marriage in many cases—and sometimes it may seem like work obligations force you to spend more time with your business partner than you do your spouse. With nearly 30 million small businesses registered in the US today, that makes for a lot of partners—and unfortunately, disputes too. No one likes to see a long-term relationship with someone they have worked with go downhill though, and especially not one that escalates into a nasty court battle.

A Thorough Partnership Contract Could Save You Later

Just as with so many trusting couples who dismiss the idea of prenuptial agreement, partners in the initial glow of the business startup may neglect to create the proper partnership contracts. Getting started on this paperwork while the going is still good is key however. While it may seem awkward at first, setting up all the rules of the partnership at the beginning means you can formulate a plan not only for how you will proceed at the start—but also the end.

The basics should be covered as to which titles each partner will hold, decision-making power, job duties, and how profits will be disbursed. Just as important though are exit strategies discussing what will happen should one or more partners decide to leave—or what will happen to their shares if they die. A dispute resolution clause may prove indispensable later too, giving you the flexibility ahead of time to choose whether any legal issues would be settled through classic litigation processes or alternative dispute resolution instead, such as arbitration or mediation.

Contact Us for Help

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!