Reib Law November 2018

REIB LAW

SHATTERPROOF NEWSLETTER

NOVEMBER 2018

WWW.REIBLAW.COM | 940.591.0600

wants to go in another. I just helped a client with that last week. He was in a bad situation and needed help getting out of a partnership. I helped him set up the pathway for an amicable parting, and it worked. We were able to set up a buyout where the exiting shareholder was able to get out what they had put in. Far too often, this isn’t the happy ending we see when business partners go their separate ways. Generally, when a partnership is coming to an end, the parties involved become tense, and it’s more challenging to be reasonable. When the stakes are that high, a 50-50 split doesn’t work anymore, and negotiations become deadlocked. What happens then? The biggest mistake I see a lot of people make is creating an equal partnership from the beginning. It might sound fair when you are first setting out, but what happens when you decide to open a new venture? That 50-50 split just doesn't work anymore. There’s no way out of it, and you’re both stuck in a partnership you don’t want to be in. If they leave the business, it cuts out value for you and vice versa if you leave with that 50 percent of the profit. It doesn’t make sense anymore. How do you get paid? How will they get paid? That’s why I tell anyone entering a joint venture to put together a legal document from the beginning that lays out some of these points. This legal document is a buy-sell agreement. With a buy-sell in place, you have a set of rules for dealing with a business disagreement. This forethought safeguards your business. It’s not because either of you aren’t quality people; you wouldn’t go into business with them if they weren’t. Those I’ve met who want out of partnerships are all good people; they just have a different idea of how the company should run. If you don’t have a plan to deal with that discrepancy, you put everyone in a tough place. The successful partnerships I’ve seen put everything in writing. They’re upfront and have a solid relationship. These partners keep that solidity because they’ve made a written plan for how they’ll deal with everything. It builds trust, which is key to cultivating that partnership. You can’t know from the beginning what the future holds, and having a plan in place will mitigate any unforeseen circumstances.

CULTIVATE YOUR RELATIONSHIPS WHY DEFINING THEM IS KEY TO YOUR BUSINESS'S SUCCESS

L ike many others, our family travels to spend time with loved ones over the holidays. For the last 27 years, my wife and I have alternated spending Christmas at our parents’. My wife, Bebe, is a native Texan and her family lives there. I am a Sooner and grew up in the Tulsa area. My parents still live in Tulsa, and we will be headed there this year for Christmas. Still, times do change, and with that comes new traditions. Since my oldest son is going to college in Tulsa at Oral Roberts University, he can only come home between his studies on some weekends. Our traditions might be a little different this year, but as long as we’re all on the same page with our family members, we can make this Christmas as memorable as any other. It’s not that different from a business partnership. When I use the term, “partnership,” I am referring to small corporations with multiple shareholders or LLCs with multiple members. You set forth your plan, goals, and vision for your business. But along the way, you might encounter changes. Maybe your vision for the company begins to go in one direction and your business partner

–Scott

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