Not so different from a marriage, many individuals enter into a business partnership with dreams of a bright and profitable future. The biggest mistake many make is to NOT consult with legal counsel before entering into a partnership. Seeking legal counsel can help you avoid the damage a “business divorce” such as ruined friendships, destroyed marriages, tarnished professional relationships and more. By planning ahead, you can save thousands of dollars and years of frustration if your partnership does indeed fail. Here are 3 of 5 tips to help guide you and your business partner into a discussion to help avoid a messy business divorce:

  1. BUSINESS FORM, ROLES & DECISION-MAKING: Partners should discuss the best business structure for them with help from their attorneys and tax professionals. A limited liability partnership (LLP) is typically chosen because of the protection it affords limited partners from the actions of the general partner. Partners should agree upon what roles each partner will assume and how to determine decisions when there is no consensus.
  2. CAPITAL CONTRIBUTIONS: Partners need to discuss and identify the sources of capital. As partners do you contribute the capital yourselves and/or seek outside investments? Be sure and discuss to make sure each partner is clear on expectations, especially if one partner provides the capital while the other provides sweat equity.
  3. COMPENSATION: Before jumping into a specific percentage of ownership, partners should discuss important terms relating to their interests such as vesting schedules, reservations of stock, equity adjustments, allocations of profits and losses, etc.

We hope these tips help you and your business partner avoid the headache of a business divorce. Remember before entering into any business partnership agreement, consult with Gerstenberger Law first. Contact us at (770) 920-7722.



The information found on the Gerstenberger Law site is for educational purposes only. Your situation and the situation of others are unique and more complex. This is neither legal advice nor to be considered legal advice. Contact us for advice about your specific situation.



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