A business partnership can be fruitful for everyone involved, and critical to the health of your new or growing business. Although going forward as a solo business act is sometimes preferable (and some business owners do best that way), in joining with another entrepreneur or innovator, you can look forward to better access to combined capital, more opportunity for brainstorming, a likeminded soul to work with as well as a support system, and someone to split responsibilities.
A strong partnership contract is recommended though, with the help of an experienced business attorney. This will help you plan and protect your business for a variety of different legal issues that could arise, to include:
- Disputes over workload – one partner may feel overworked, while another is interested in directing their efforts in another area. These types of issues can often be resolved without legal action. As a business owner and partner, schedule frequent meetings so workloads and projects can be discussed. With good communication, changes can often be made before resentments begin to develop and grow. Outlining work responsibilities in the business partnership contract is important, but duties can change over the years significantly.
- Finances – while this should obviously be one of the central focuses of any business partnership contract, as your business begins to grow and change over the years, partners may begin to chafe under the original profit distribution plan. Salaries and expenses may need to be expanded (or cut back) with time, along with examining the current financial success of the company. Although money matters can cause ugly disputes, they can be worked out amicably with continued communication. In some cases, this may require the advice of both your business attorney and your account—or even a mediator.
- Intellectual property – your contract may state that the company owns inventions and innovations created within for different work projects; however, depending on the level of work and ingenuity put into such innovations, one or more partners may want ownership of a copyright, trademark, or patent. This becomes even more serious if they are planning to leave the company and want to take such ownership with them. While your business and partnership contracts should protect you, consult with your business attorney if negotiations during a dissolution become complex.
- Dissolutions, buyouts, and firings – exit strategies for partners should always be figured out ahead of time. While you may not be able to imagine such a thing in the beginning, as time passes, partners may decide to go in different directions. This is much easier for the business if you have a detailed dissolution plan built into your contract, along with considerations for any buyouts. There could also be the unfortunate instance that you must let a partner go, which is why it is critical to have expectations clearly outlined, as well as the process for dissolving their partnership.
If you find yourself in the middle of a contract dispute, consult with an experienced attorney like Shane Coons right away to protect your business. Call now at 949-333-0900 or email us at Shane.Coons@seclawoffices.com. We will be glad to meet with you to review your case and explain your legal options. Our office is here to help!