In part 1 of this series, “Protecting Yourself From a Business Divorce”, we discussed the importance of seeking legal counsel when forming a business partnership. If a partnership does fail, it’s better to have planned ahead to help deal with the aftermath of the split. We discussed the first 3 of 5 tips to help guide you and your business partner into a discussion to help avoid a messy business divorce: Business Form, Roles & Decision-Making; Capital Contributions; and Compensation. Here are 2 more tips to consider when entering into a business partnership:
- EXIT STRATEGY & FORCED EXITS: Disputes can arise when one partner wants to sell the company or cash out and the other partner does not. Partnership agreements should consider conditions leading to termination of the partnership and/or exit strategy. It’s also wise to consider the effect of partnership interest in the event of death or disability of a partner. Typically a right of first refusal and a buy-sell agreement is advised.
- DISPUTE RESOLUTION: Partners should discuss resolutions to deadlock and alternative means of resolving disputes. Agreeing on early mediation or arbitration clauses is suggested. They may also consider selecting a forensic accountant to determine valuation or assign formulas for determining ownership interests.
Please consider these tips seriously and 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.