Watson Esam | News | Partnership Agreements
Partners for life?
Two examples, both happened in the same week: in the first, a partner of a business came to us after the other partner who held the premises in her own name had unilaterally closed the business. That other partner also controlled the bank account. In the second, a more experienced businessman was setting up a new business. Before we had even broached the subject, he said he wanted a partnership agreement, even though his business partner was a longstanding friend. In fact it was precisely because he was a friend that he wanted the agreement, so that he wouldn't lose the friendship if a difference of opinion arose between them in the business. In due time the experienced businessman also faced a business dispute with his partner. Would there be any difference as to how he would cope with it?
If you've ever had your mind spinning with the prospect of setting up your own business - or if you can think back to the time when you did set up a business - you'll know how your thoughts rushed from one thing to another: premises, equipment, telephones, notepaper, business cards, website, VAT registration, vehicles, who is going to do what, which client or customer's job to do first? How to juggle all the jobs there are to do in starting a business let alone bringing in the business and then actually doing it? Then there might actually be life outside of work and a wife or husband plus children to relate to. Help!
Then there are all the organisations, government and private, which offer to help you. "Which of all these do I choose? Help me to get help!"
There isn't one magic phone number to call which will solve all the problems unfortunately. But there are people such as Business Link, the Chamber of Commerce, SENTA and others who can help and provide you with information, accessing grants and business loans, useful contacts and training and even paying for professional advice. You may also be able to shelter under the wings of an experienced businessman or businesswoman through one of the mentoring schemes around and learn from their experience how to get your new business under way successfully.
Yet one thing is often overlooked when people go into business with others. Or if it is considered, it is dismissed as an optional extra, something to think about much further down the line - a partnership agreement. Or for those using a limited company - a shareholders agreement.
These documents can be complex but they can also be made quite simple and user-friendly. It's not a "one size fits all" arrangement so they can also be tailored to any particular needs. They are an excellent way of preventing a lot of trouble and expense in the future. We calculated that the legal costs in sorting out a dispute, not even getting as far as court, could be around six times more than having an agreement at the outset. And that is not counting all the hassle and distractions from running the business when a dispute arises.
In the first example above, the person whose partner had closed the business down without any consultation or warning, there was no real hope of being able to help. Yes, there may in theory be some legal remedies, but only if the person was prepared to throw a lot of money at it.
In the second example, although a dispute arose it didn't become a problem - it was resolved under the agreement. Enough said?
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