I have heard before that there was no need to have a business attorney because “I am going into business with my friend”. The potential partners, whether in a corporation, limited liability company or some form of partnership, believed that everything would be happy forever because, like newly weds, they were in the honey moon period. Business endeavors are like marriages, happy when times are good and bad when things go awry. Having a business attorney assist you upfront will assist in avoiding disputes in the future.
It is hard to think about what will happen when times are bad. The business does not take off the way that things were expected. The partnership, although friends, had difficulty and different perceptions of how to spend money and develop the business. It happens in some of the biggest companies – consider that Steve Jobs was once ousted from Apple – and it can happen to new startups between friends.
Both friends should make certain that there is an operating agreement, corporate by-laws or partnership agreement that spells out what will happen in the event the worst case scenario happens. What about buyouts by one partner over others. What if one partner wants to quit. What if there is a need to accumulate debt and who will be personally responsible. These are the sorts of hard questions that business attorneys ask that nobody wants to answer. When finding out that there may be disagreements as to these issues is where an attorney can assist and help get things ironed out.
For example of how this can play out consider I have a friend that was a member in an LLC that is going through the perils of not having had me or another business attorney look at the agreement before signing up. You see, this friend is leaving the LLC for a better situation. The problem is the Operating Agreement was written VERY favorably to the LLC even though the partners had discussions about what would happen that are different than what the Operating Agreement says. The other members of the LLC are jealous that my friend is moving to a better situation and are trying to block that based on the operating agreement. So be it for friendship of partners.
This scenario and the impending litigation that will develop from my friend’s situation could have been avoided. You see, money changes things with any partnership. Like in a divorce, friendship goes out the window when it comes to severing the partnership as money takes over as the issue. A business attorney is there for you to avoid these issues in lieu of having to litigate such issues.
Hiring a business attorney does result in some initial expense. However, plannig with an attorney at the beginning of a partnership can save significant expenses with the attorneys if things change. Call business attorney, Jason Wischmeyer, to discuss your business partnership to know what your rights are and to make sure things are set up correctly according to what the partners expect and want to happen.