In business, disagreements are inevitable, even when the relationship between the partners is good. Unfortunately, minor conflicts have the potential to snowball into disputes that can leave you – and your business – vulnerable. So, how do you protect yourself and the company you worked so hard to build?
Put everything in writing.
No matter who your business partner is, even if it’s your brother or your childhood best friend, a written partnership agreement is a necessity. Should a dispute arise in the future, it’s important to have clearly defined each partner’s role, capital contributions, and ownership interests. A written agreement should also outline how important business decisions will be made, how disputes will be resolved, and what happens if one partner dies, falls ill, or wants to leave the partnership.
Build a financial safety net.
To protect your financial interests, make sure your written agreement limits the amount of debt that can be tied to the partnership without your consent. Invest in a comprehensive insurance policy that will protect the company from potential losses. You and your business partner should also ensure that the company maintains ample capital on hand to cover any liabilities.
Choose your structure carefully.
When deciding which business structure is best for you and your partner, consult with legal and tax professionals. Consider hiring an experienced attorney to assist with drafting your partnership agreement, or at the very least, to review the agreement before it is finalized. An attorney can also assist with proper execution of any important legal documents as the business is set up.
There are numerous benefits to having a business partner, but the relationship is not without risk. If you’re considering entering into a business partnership, consult with an attorney that has expertise in partnerships. If you’ve already formed a partnership but fear that a dispute may arise, an experienced attorney can help you determine the best course of action to avoid or settle the dispute. The attorneys at Gaslowitz Frankel have been helping their clients resolve disputes for more than 25 years. Call for a free consultation today.
