When starting a business, many people look to partner with someone else to share the financial risk, to share the burden of getting the company off the ground, and to share the joy in building a business. Starting a company from the ground up can require a big commitment and many people choose to partner with a close friend in order to give the new organization a chance to grow and thrive.
When you are going into business with a friend, you need to think about the practicalities behind joining your financial interests with someone else. While it may seem like a fun idea, disagreements and problems can arise in the future. This is especially true if you want to do business with your friend but if you hate your friend’s spouse. There are steps you must take to protect yourself so you do not face future financial loss or set your business up to fail. A business lawyer can provide you with the advice you need to ensure that you don’t put your finances and company at risk by going into business with a friend.
What to Do When You Are Going Into Business with A Friend
Whenever you are going into business with a friend, you need a number of different documents to start the company and to establish how the business will operate. You need not only a business plan, employment contracts and an operating agreement or partnership agreement, but you also need a buy-sell contract. A buy-sell agreement will specify what happens to the company if either one of you need to leave for any reason.
A buy-sell agreement is always necessary to ensure that a business can survive the departure of one of its owners and to protect the financial interests both of owners who leave a company and those who continue to do work for the business. Such an agreement is even more essential when you are going into business with a friend whose spouse you hate.
The reason a buy-sell agreement is so important when going into business with a friend who has an unpleasant spouse is because you want to make sure that you do not end up in a position where you could have to work with the spouse. This could happen if your friend wants to bring his or her husband and wife in as a later partner (you could have a disagreement about whether this is acceptable). It is also very likely to happen if your friend dies or divorces. When your friend dies, the unpleasant spouse could inherit company shares. If your friend divorces, the divorce settlement agreement could give the spouse you do not like an ownership interest in your company.
With a buy-sell agreement, you can prevent this from happening and ensure that no shares ever fall into the hands of your friend’s unpleasant husband or wife. Pintar Albiston, LLP can help you to draft a buy-sell agreement to protect your interests. Call today to schedule a consultation and learn more about how a lawyer can assist you.
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