A business partnership without a formal partnership agreement can be a recipe for disaster. As RMB Lawyers Managing Partner CRAIG OSBORNE explains, prevention is better than cure:
Thousands of Australians operate businesses.
Many of these businesses are conducted in concert with a number of owners in either a partnership or a company structure.
I continue to be amazed at how many intelligent and street-savvy business people fail to have a written agreement that sets out the rights and obligations of the owners of their business.
These documents are not expensive in the context of running a business when compared to start-up or purchase price, rent, wages, technology and stock.
Such documents include things like partnership or shareholders agreements. These agreements set out rules about how the business will be run and how the owners will conduct themselves across things like:
- Management
- Profit sharing
- Decision making
- Buy-ins and buy-outs
- Resolving disputes
Most businesses don’t last forever. Things change. People change. Competition changes. Government rules change. Pandemics occur.
When things change owners of businesses can fall into dispute. Sometimes there are disputes over money, other times over customers, over work effort or other behaviours.
Sometimes serious illness of a business owner or even death can be the cause of problems.
This is where the rubber hits the road.
Lawyers like myself spend an enormous amount of time attempting to resolve disputes between business owners where the relationship has soured. Where things can’t be resolved by negotiation or compromise, they end up in Court. Court cases can be very expensive, time-consuming, stressful and generally negative to the performance of the business you have built.
Looking back at over 30 years of these types of disputes, I would say 95% of them would have been avoided or been able to have been resolved without Court intervention if there had been a good written agreement in place between the owners.
If you are thinking of starting a business – or are already involved in a business partnership that does not have a written agreement in place, I strongly recommend that you seek legal advice as soon as possible. This does not signal distrust of your business partner(s), but should be seen as a sensible move that will benefit all parties in the long run.
After all, prevention is better than cure (and usually much cheaper). If you would like to speak to a lawyer who specialises in business disputes, please contact our office to arrange a free consultation. You can contact us by by phone or our 'Ask a Question' tool on our website.