Many times when our clients are faced with a dispute they sometimes blame themselves for not taking a more proactive approach in running the business but the reality is that when you are busy developing and growing a business “partnership relationship” issues will inevitably fall through the cracks. Now what if you could go back in time – knowing what you know now – or what if you are not faced with a partnership dispute but you would like to adopt some proactive measures? Well then I have some basic but extremely important points for you to consider:
- POINT 1: You Need a Written Partnership Agreement. So don’t wait and while I understand that you may have more pressing matters you need to start the process now. Identify who manages day to day operations, who is involved in sales, what happens if one partner wants to sell or buy the other out, how should income be distributed and what happens in the event of a dispute. Get it in writing now because I can assure you that at least 30% of the partnership disputes I see could have been avoided if an agreement was in place.
- POINT 2: You Need to Be Involved in the Finances. Often business partnerships involve a division of duties with one partner controlling and managing the finances and financial records. While this is ok, if you are the partner who is not in control of the financial records then you must make it you business to review these records, speak with the outside accountant and your partner on no less than a quarterly basis to review these records. If you don’t you just might find that your partner has been taking money right from “under your nose”.
- POINT 3: Complete Your Corporate Records and Stock Certificates. Chances are that your business will be a corporation or limited liability company and in such case that means that you are either a shareholder or member. If this is the case you need to cover your bases and insure that your corporate records like your by-laws are completed, that you conduct annual shareholder meetings and maintain minutes of those meetings and, most importantly, that you actually issue to yourself and your partner the stock certificates or membership certificates evidencing your ownership of the business. Take these certificates home and store them in a safe place with your other valuable assets. Don’t leave them at the corporate offices.
Now having gone back in time if you addressed Points 1, 2 and 3 I could assure you that you will be much better equipped to address your dispute and, in many cases, avoid it entirely.
No Time Machine but a Great Book: To learn more about protecting your partnership and business interests and what to do when faced with a dispute with your business partners, order a complimentary copy of Charles N. Internicola’s book “The New York and New Jersey Partnership Dispute Guide.” To receive your free copy, please click here.