Friends & Family Law
By Gale Moore, Esq.
Published: December 11, 2008
When entering into a business partnership with a spouse, relative or friend, it’s natural to be excited. Thinking about getting the business off the ground and looking forward to what the business will bring is part of the initial rush.
Unfortunately, many people who enter into a business partnership with a spouse, close relative or friend do not take into consideration what could happen down the road if the business changes. Discussing items such as business dissolution, disputes and financial risk are not always on the minds of some new business partners. So it is essential that you take every step necessary to secure your business and your personal relationships.
The first step is to sit down and talk with an attorney. You should consider all the details of the partnership to make sure each party understands each one’s role, priorities and goals for the business. Allow the attorney to ask you questions that could help reveal future situations not yet identified.
For example, what is to happen if one partner begins to show that he or she is not performing to the fullest role of a business partner, and what steps are to be taken if the partner does not correct his or her actions?
Planning these situations out in advance, however uneasy to talk about at first, will help alleviate the future stresses that could arise and most importantly protect the personal relationships between the parties involved.
The first step is to draft an agreement that outlines a general overview of how the business is set up and how it intends to grow. This is important because priorities may shift or go in different directions. The agreement identifies how a modification to the business structure or goals should take place. It should outline what would happen if a business partner begins to fail at duties or not act as an equal business partner – business dissolution, partner buyout or the ability to renegotiate terms of the business.
An agreement will also put into place terms on executing the agreement such as what law applies, if a dispute arises how it will be handled in state or federal court, as well as if priorities change if the agreement is still valid in whole or in parts.
You will set up at the beginning each parties' rights and obligations towards one another. They can deal with everything from who gets to keep the furniture if the business closes, to where the business will operate, to expected work performed or hours contributed by each party toward the venture. Again, this can help alleviate bitterness, anger or frustration between the two people that will effect the established personal relationship.
It is important to know that despite the best intentions of the parties at the time an agreement is signed, the contents of the agreement may still wind up being evaluated by the court and sometimes changed, if one of the parties later has a problem with the agreement. While the court will pay a great deal of respect to any written agreement, if an agreement is unfair or becomes unfair the court may be willing to look into things and perhaps make an order that is different than what the parties agreed to in their agreement..
Executing a business agreement is essential to a business partnership – especially if the business is with a loved one or spouse. It will allow all parties to see each other on an equal playing field and show how each contributes equally to the business. It creates a win-win situation for everyone involved by establishing a full disclosure and understanding. It helps to show that amount each business partner relies on the other.
Most importantly, when going into business with a spouse, relative or friend, the personal relationship needs to be protected. Writing up an agreement in the beginning will lower the emotional stress of business changes because it is all laid out and agreed upon in the beginning.
About the Author
Gale Moore attained a Bachelor of Arts in Political Science from the University of North Carolina at Chapel Hill in 1990 and acquired her law degree from Stetson University of Florida. Upon attaining her law degree, Ms. Moore became an Assistant Public Defender in Pinellas County and in 1998, Ms. Moore began private practice which has developed into a focus on family and estate law matters.