Going into business with a partner feels simple at the start with excitement and a shared plan. But that’s exactly when the cracks that cause disputes later get baked in.
When the seed is planted, most people launch into the co-ownership of business full of great intentions. Maybe you are co-workers striking out on your own, perhaps employees buying out a retiring boss, or mates with an idea? The same mistakes catch people out.
Things come unstuck when the partnership doesn’t play out as intended. One person feels they’re carrying more, one had to put in more capital, or your goals just diverge.
Far too often this can see jointly owned business end up in dispute. Once things hit a dispute, OFRM Commercial Law Specialist Lachlan Edwards and his business law team can help you navigate the resolution. But before this, the much better way to go is to avoid a dispute or have a clear path in times of trouble. We can help you here too.
Situations Business Lawyer Lachlan Edwards sees most
Unfortunately this is a situation that I see commonly where business owners go into business together and have uneven contributions.
I’ve helped people in this situation by guiding them to an exit that fairly reflects their contributions.
Where people fall down when going into these arrangements is not clearly documenting and obtaining professional advice in the beginning, from someone who doesn’t have their rose coloured glasses on (aka your business lawyer!)
That process starts by getting to know you, your motivations, what you hope to achieve, and from there guiding you on the best structure for the ownership of the business -including a comprehensive owner’s agreement. We’ve spoken about this before in another article here.
Think of it as a form of insurance. What you really want is:
- Setting up the enterprise properly so there can be easy entry and exit.
- Formal legal agreements in place including succession planning, roles and responsibilities and what happens if you fall into dispute.
When you are optimistic about the new venture, you might think this is unnecessary, but imagine:
- in the absence of an owner’s agreement, the other owner could sell their shares to another party and suddenly you’re in business with that new person.
- In a partnership, in the absence of an agreement providing otherwise, the relevant law enables one party to “call it quits” and even insist on the partnership being wound up with assets sold and any money left over divided. This can pull the rug out from under one party. A properly drafted agreement will make sure that can be stopped or a fair process is put in place
While all business ventures start with trust, confidence and enthusiasm it’s important not to forget to get the basic structures in place – don’t rush in, make sure you take OFRM Lawyers on the journey with you with some early planning about how to structure and manage the ownership of the business.
If you’re starting a business with a partner, or you’re looking to protect your existing ownership arrangements, our team at OFRM Lawyers can help. Contact our Business Law team to discuss your circumstances and obtain tailored legal advice.
