By Travis Townsend
The other day my office phone rang, and on the other end was a prospective client virtually screaming me into hearing loss about a business relationship gone sour. He gave me the full rundown about how stubborn his partner is, how his partner really doesn’t understand the vision of their business, and how his partner is blocking him from implementing strategies that will assuredly lead to significant profit margins for their company. His query to me: “What legal steps can I take to get control of my company so I can run it the way I want?
This story is far more routine in the world of business relationships than it has to be. I wish I had a dollar for every time I’ve heard the story about the unbearable, short-sighted, villainous business partner blocking the company’s growth. I feel like a divorce lawyer sometimes. What makes these situations even harder to swallow is that I know that when the partners initially got together they were hopeful, in awe of their respective business acumen, and overwhelmed by each others’ work ethic. But most of the time, neither I, nor another business savvy lawyer, was around for that part. Far too often business partners keep the blissful times to themselves, and share with the lawyers only in rocky times; and that’s where the error lies.
A key step in building a prosperous business relationship is bringing the lawyers along on the honeymoon. If you want to have a long-lasting business bond, it helps to have a clear understanding of expectations, rights and obligations, and clear procedures for decision making as well as exit strategies. There’s no better way to do that than to have expert legal counsel assist with the organization of your business entity, the preparation of your governing documents, and most importantly, the drafting of your relationship agreement.
When enterprising parties first get together, all they can see is the promise of embarking upon the venture together. Likes and commonalities are naturally more salient than dissimilarities and diverging philosophies; otherwise the parties would never take the leap of starting the joint endeavor in the first place. Therefore, little thought is given to devising mechanisms that ensure the actions of all parties are consistent with the company vision. Almost no concern is shown for possible decision-making impasses. New partners rarely consider what will happen if they come to a point where they absolutely cannot bare teaming up any longer and must go their separate ways.
At minimum, any parties who are contemplating entering a joint business enterprise should consult with a corporate attorney at the onset. The financial expense of a simple consultation pales in comparison to the costs associated with poor corporate structure, inflexible governing documents, and uncertainty of partner rights and obligations. Moreover, expenditures that result from a bad foundation are not limited to monetary outlays. The emotional strain of dealing with a dysfunctional business relationship can take a hefty toll on a person. Friends and family who become business partners may become estranged enemies when business goes bad. So please, all you aspiring business moguls, do yourselves a favor before hopping into the sack with a partner and hire competent legal counsel. Remember, Ike and Tina started out with love aflame and money rolling in, yet and still that union ended up rollin’ down the river when it was all said and done.
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