Alexander Abramson PLLC - February 2020

Your Business Matters AlexanderAbramson.com • (407) 649-7777 February 2020

A Lasting Partnership

The Key to a Healthy Business Relationship

As we celebrate love and relationships this Valentine’s Day, I can think of no better time to touch on one of the most critical and most underappreciated contracts: the partnership agreement. Much like in romance, establishing a healthy relationship with your business partner takes work, but it’s key to building something that lasts. If you’ve heard me talk about partnership agreements in the past, then you know I tend to compare parties are swept up in the excitement of this new chapter of life, and both have that moment when reality starts to set in. While no honeymoon can last forever, proper communication from the start of any relationship can make a world of difference when the cracks inevitably begin to show. This is one area where the way we approach personal relationships can better inform our formation of professional ones. Naturally, most people would know whether or not their significant other wants children before proposing to them. That’s the sort of subject we expect will naturally come up at least once or twice in conversation ahead of any couple tying the knot. And yet, people go into business together all the time without any idea of what their partner wants from the venture long term. them to marriage. Both have a honeymoon period, where both

Mismatched expectations are a surprisingly frequent source of friction between business partners. After all, if you planned on building your company to sell, but your partner was planning on living off the steady growth for decades, then you’re inevitably going to run into conflict as it becomes clear your business models just don’t match up. What’s worse, if a proper partnership agreement isn’t already in place to handle this disagreement, you could be looking at a messy and expensive divorce. The problem is many entrepreneurs don’t know to ask these “down the road” questions while planning a business with someone. It’s easy to get swept up in the honeymoon phase of executing all the exciting parts of launching a company. During those good times of cooperation, it can be hard to see the very real need for a partnership agreement. You’re both on the same team, so surely you could solve any dispute just by talking it out, right? Wrong. There is no turning back time once a major disagreement with your business partner crops up. If your co- founder decides to saddle you with the majority of the work nine months in, despite having an equal share of the equity, they certainly aren’t going to sign a new agreement decreasing their ownership amount. Similarly, if you planned on passing your business to your children, you probably

couldn’t be talked into selling the company five years in, no matter how your partner reasons with you. The only way to ensure a business will satisfy both parties’ long-term goals is by putting a partnership agreement in place before settling in to run your company. This is where a business lawyer can come in handy. While most of us have a general sense of the sort of questions we should ask a partner before marriage, the same isn’t true about professional partnerships. An experienced business attorney can guide these difficult and sensitive discussions toward the questions that need to be answered to lay out a unified vision for the venture. The resulting agreement can be the bedrock on which you build a happy, fruitful partnership.

Here’s to all the relationships in our lives,

–Ed Alexander

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