I sometimes meet business owners who don’t have an ownership agreement with their business partners, and an ownership agreement can be called different things depending on the type of business entity you have, but people often refer to it as a partnership agreement. Sometimes we call it a shareholders agreement, operating agreement, or a buy-sell agreement. No matter what we call it, the important thing is that you have one put in place if you have a business partner.
I sometimes meet business owners who are thinking about getting a new business partner, whether that’s bringing somebody on to an existing business, or starting a new business with someone, and i often tell them that it seems great to go into business with someone, and many times it is, but you have to realize that it’s like getting married to someone but without all the good stuff, and the divorce can be so much worse. So from my perspective, so many times over the years, I’ve seen great successful businesses shut their doors or otherwise fail because the business owners can no longer get along, and this breaks my heart. I think about all of the hard work, time, effort, money, and resources that goes into getting a business started and making it successful, only to have it shut down because people can’t agree. So all of that work was for nothing.
That’s why this is a passion area for me. The beginning of the partnership is the best time to put an ownership agreement in place. This is the most important time because it’s where the relationships get defined. It’s where everyone figures out the role they’re going to play within the business, and it’s the easiest and best time to do that because everyone is getting along and they’re optimistic about the future. So it’s easy to put an agreement in place; the second-best time is maybe after you’ve been in business for a little while together and you’re still getting along, and you’ve got some experience under your belts, and you’ve kind of worked out the initial kinks, and now you can really define your relationship and put a lasting agreement in place that’s good too.
The absolute worst time to put a partnership agreement in place is after you’re no longer getting along. There’s not much we can do at that point except negotiate a separation which may or may not end up good for you, and it certainly costs resources, time, and money to negotiate that separation. So defining your relationship, putting some structure in place so you can each have your own lanes, can help avoid problems from occurring. But if they do occur, you can have some rules in place and some structure and a plan laid out for everyone to have a clear path forward to resolve the issue the easiest way possible.
So if you have a business partner, and I hope you have a good partnership or ownership agreement in place, if you don’t and you want to talk about it, call us at our office at 904-860-3111 or take a look around our website. We’ve got some great resources.