Starting a business with a business partner is an exciting time. And if you want to give your new company or partnership the best shot at success, you should plan ahead so you can increase the possibility of resolving disputes quickly and efficiently. This post will provide a few tips on how to do that.
Document Contributions, Responsibilities, and Procedures
One of the most essential first steps is to clearly document what each shareholder, member, or partner is contributing in the form of cash, property, and promissory notes. You should also document the job titles and responsibilities of each individual involved. These items can be written in many places, but you will most commonly find them in an LLC’s Operating Agreement, a Corporation’s Bylaws, or in a Partnership’s Partnership Agreement. Alternatively, they might be written in another document such as an employment agreement or member/shareholder agreement.
Prepare Model Contracts
Your company will need to rely on contracts for all kinds of situations and it will likely save you time and money in the future if you work with attorneys up front to review the contract forms you are using. An attorney can also help you to create a standard set of model agreements for your future use in many different situations.
Always keep the line of communications open. Honesty is important, but so is being honest without condemning your partner. It is also a good practice to outline dispute resolution options in your company’s governing documents. You may include an obligation to negotiate disputes in good faith or perhaps use a friendly third party advisor to help resolve any disputes that might come up while you are running your business.
Prepare for the Worst
In all the excitement that surrounds a new business, many partners don’t want to consider the down sides – what happens if someone fails to perform or becomes incapacitated. Those are serious issues that can and do happen and when partners fail to consider what to do in each scenario the company might find it hard to push through one of these situations. At the beginning the owners should agree on a course of action for each contingency so they will have a roadmap if the event occurs.
How to Do It
If you are setting up a new business (or need to clean up an old business) and you need assistance with these matters you should consider seeking an experienced business attorney. Your attorney can help your company draft an Operating Agreement or Bylaws, as well as additional documents such as employment agreements, contractor agreements, shareholder agreements, and similar documents.
If you need such assistance, you should contact one of our Business Law Attorneys today.
*This article is very general in nature and does not constitute legal advice. Readers with legal questions should consult with an attorney prior to making any legal decisions.