Partnership agreements sound very simple on the surface and appear as if they could be very easy to fill in. Certainly, you can buy online forms of partnership agreements. I work with our clients to make sure that partnerships agreements are set up correctly so that companies can stand the test of time and make sure that many of the contingencies common with partnerships are planned for in advance. These are what we call the four D’s.
#1 Death. What happens if one of the partners dies? How does the business change? Where does the ownership go and how does the business continue? This may be a place where key man insurance may be appropriate, and I can discuss the legal benefits and alternatives in that area.
#2 Disability. What if one of the owners becomes unable to work in the business? How will the business financially continue? How will the partnership make sure that everything continues to move forward and that the financial needs of the disabled person are met while the company still has a chance of survival and growth?
#3 Disagreement. What happens if the owners disagree about the future of the business and the direction? What if they want to do different things with the business? What if they have different life plans and one wants to exit before the other? Or they hit a crossroads in the company, and the two owners want to go in different directions? These are all things I can look at and help plan for in advance.
#4 Divorce. What if one of the owners gets divorced and their ex-spouse becomes part owners of the business? What plans can be put in place in advance? How can we make sure this is done correctly from the start?
These are just some of the issues with partnership agreements. There are many more below the surface, and it is my goal is to work with our business owners to attempt to build companies that can stand the test of time. To make sure that regardless of what happens among the partners, the business continues to move forward and the values protected. Making sure that it’s more likely that each of the owners can get paid for their hard work and contributions throughout the life of the company.