Wednesday, August 13, 2008

Getting into bed with someone...professionally speaking?

In the last month, we've fielded no fewer than five calls from entrepreneurs who were desperate to get out of problematic business partnerships.

Problems have ranged from partners not putting up their fair share of "sweat equity", divergent viewpoints on business direction, partners who disappeared and went incommunicado, to one instance where a minority partner was removed by the majority partners from an LLC without notice or a meeting of the members.

Thankfully, most of these issues settled amicably, but two are heading to litigation, a costly and time consuming endeavor.

A business partnership is fraught with uncertainty and risks that you might not be aware of. Have you considered what would happen to your business if a partner dies, becomes disabled, gets divorced or goes bankrupt? What if a partner wants to withdraw from the business or sells his or her equity in the business to someone you didn't want, or expect, to be partners with? What if a partner prevents you from selling your equity in the business? Have you considered who will have control over major business decisions or what may happen to your business if you and your partner have equal control and you have a stalemate on a major decision? No matter what legal form your business is in (corporation, partnership or limited liability company), business partners must have an agreement which protects the business and each partner from these uncertainties and provides a framework for how these situations may be resolved.

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