How to Avoid Irvine Partnership Disputes
If you are going to start a business with a partner, you may see a lot of benefits. The workload will be shared, and you can rest assured that the other person will put in a great deal of effort. Of course, the risks will be shared as well, and this is another positive.
When you are entering into a partnership with a friend, it can be especially exciting. You get to spend a lot of time with someone that you get along with, and it is likely that there will be a particular workplace synergy. Together, you may be able to accomplish great things, and there should be a positive energy that everyone on your team can share.
In a very real sense, the picture that we are painting sounds like a marriage. Yes, getting married is more intimate, but you are committing to spending all of your time with someone that you care about a great deal. When you get married, you feel as though you have found your lifelong partner.
Even though people are very sincere when they take their vows, when you look at the statistics, you see that approximately half of first marriages end in divorce. The majority of second and third marriages do not withstand the test of time. Apparently, people that were very resonant at one time often find it impossible to get along eventually.
This can certainly enter the picture when it comes to business partnerships. In this blog post, we will give two important tips with regard to the ways that you can avoid Irvine partnership disputes.
Enter Into a Written Partnership Agreement
They say that a verbal contract is not worth the paper it is printed on, and this is definitely true. The most important step you can take to prevent future Irvine partnership disputes would be to enter into a written partnership agreement with your partner. It should include a number of essential elements, and the first one would be the matter of control. Is it equally shared, or does one partner have more control over certain aspects of the business than the other?
The second element is the definition of roles. For example, let’s say that you and your friend are starting a bar and grill. You are a fantastic cook with a background in the culinary arts, and he is a former bartender. The partnership agreement could make you the kitchen manager and your partner could be the manager of the bar operations. Another option would be for each partner to manage the entire restaurant for half of the time that it is open.
Capital contributions should be clearly recorded in the partnership agreement, and future capital contributions should be addressed as well. A business decision making process should be spelled out in the partnership agreement, and there should be an exit strategy elucidated.
When it comes to the possibility of one of the partners passing away, a buy-sell agreement can provide a solution. With the agreement called the cross purchase plan, the partners would determine the value of a share in the business. They would each take out life insurance policies on the other partner that will pay out a sum that is equal to the value of a business share.
After the passing of one partner, the surviving partner would receive the insurance policy proceeds. They would be used to purchase the share in the business that was owned by the deceased partner from his or her family. The family would have liquidity to spread among multiple heirs, and the surviving partner would have total control of the business.
Obtain Legal Assistance
It is not wise to enter into a partnership or operating agreement without legal guidance. You should definitely understand potential exposure to lawsuits, tax consequences, and other important details. A business attorney can gain an understanding of the nature of your business and the dynamic of the partnership and provide the appropriate solutions.
If you are thinking about entering into a business partnership, we would be glad to sit down with you to discuss the legal ramifications. We can do this with you independently, but if you would like to come in with your partner or partners, our doors are definitely open.
You will find that you will receive friendly, direct, personalized attention when you reach out to our firm. If you would like to do just that, you can send us a message through our contact page or give us a call at 714-406-4420.