Business Relationships

Document the Arrangement

If there is more than one owner / business partner, they should have an agreement.

Developing a well thought-out, well drafted contract, helps the parties to formulate their thoughts on how the relationship will work.

It also helps them to make sure they have the same expectations before entering into a commercial arrangement, and reduces misunderstandings and the risk of disputes.

Types of Agreements

The types of agreements involved are usually:

Shareholders and Unitholders Agreements
Partnership Agreements
Joint Venture Agreements
Co-Owners Agreements.

Business Plan

Ideally, a business plan (even a basic one) should be attached to the agreement but we recognise this is not always practical.

Preparing a business plan assists in planning and ironing out potential mismatches in expectations.

Business Succession Planning

Smart business partners work out in advance what will happen in the following scenarios:

Voluntary exit - where one or more of them wants to leave the business (or sell the business)
Involuntary exit - where one or more of the business partners is unable to continue to participate in the business, whether throug death or incapacity.

It is best to deal with these matters at the beginning of the relationship if possible, or at least before any of the partners decides to, or has to, leave the business. At this time it is easier for the partners to work out a fair arrangement dispassionately.

If it is proposed that at some point the business be sold, either to an external party or to management and/or other employees, it is advisable to document the arrangements.