April 4, 2014. Starting a business is exciting. Teaming up with others to create a new business may mean you’re on the road to success. However, when one or more of the owners wants out or stops cooperating, the remaining owners are often left with a mess. How can you prevent this mess? First, choose your business partners wisely. It is helpful to have clear roles laid out from the start. If one partner is an investor, while the other will work on the day-to-day, and the partners are compensated accordingly, set it up from the start. Next, consider the possibility that one or more of the owners may want out. How should she be compensated, and how her buy-out is funded can be set forth in a Buy-Sell Agreement. Knowing you have a fair exit strategy will help to create a positive environment for the firm to succeed. Create checks and balances in the Bylaws or Operating Agreement. Should contracts involving a certain dollar threshold require approval from two owners? Communicate who is authorized to sign checks and handle transactions to your financial institution and creditors. Taking time to think ahead to an exit strategy could save a friendship among partners, and it could save a business.
For additional information about starting a business or business law, contact the Goosmann Law Firm at info@goosmannlaw.com or call 712-226-4000.
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