As an entrepreneur, there are a lot of things for you to learn. If you are planning to partner with someone, or if you have partnered with someone, then you may want to look at whether you have an exit plan in your partnership agreement. At Kaufman & Forman PC, we know that regardless of how well you get along with your partner(s), disputes can arise. However, if the partnership dissolves, an exit plan could protect you from unnecessary litigation.
Smart Business magazine states that one of the things you and your partners should decide is how a payout to the departing partner will be done. For example, if you and your brother are starting a business and then you have a falling out, he may decide to leave the business and expect you to simply buy his half. However, you may not have the funds to do that right away. In this case, having a written agreement that any buyouts will be done over an increment of time would not put you in a sticky situation where you would have to take out a second mortgage on your house or a loan on the business itself.
Another good idea is to have each partner’s equity in the business valuated. This can prevent your partners from claiming that the business is worth more than it really may be if they decide to cash out their share. Additionally, you should also decide whether you want the ownership sold back to you or whether you are okay if your partner sells to a third party. This can ensure that you still retain control over your business and that you have the deciding factor in who becomes a partner. For more information on legal matters concerning business owners, please visit our web page.