In our second blog of the month we continue with, why, do so many partnerships lack any kind of structure to protect their investments and relationships? And why it is so costly when something happens, and it will.
Regardless of what services an owner offers, or the compensation method established, employee or rental, a partnership agreement will solve a whole area of issues before they ever show up. In its simplest explanation it will, among other things, help establish the value all partners bring to the relationship. This is extremely beneficial in the event of a business divorce. Whether one partner provides service revenue while another handles the business side, both bring value to the relationship. And it will expedite the process in the event one partner wants out because of, say a spouses career transfer or simply each have different ideas of how they perceive the business is being run.
The next area a partnership can resolve is a silent partner, verses one who is actively working the business. When is there a payment due to the investor, how often, and is there a buyout clause? A partnership agreement would also spell out how any profits would be divided up among all partners and how often. If each partner performs a service and rents their one room table or chair, do they pay a flat amount of rent each month to the partnership as a separate identity within the partnership?
All of these issues should be spell out financially, with arrangements if/when something goes wrong. Also I would incorporate in the partnership agreement an insurance policy for death and disability on each of the partners in event that something major happens. Then the business can still survive, God forbid. This type of policy is a business write off and paid for by the partnership. In essence a partnership should contain the foundation of a buy sell agreement. One should seek an attorney in your area that specializes on this most important area of their business. If you cannot find one contact our office for a referral. Kassidy122@earthlink.net
In our 3rd Blog, we will cover the key elements of an Employee Agreement. And why it cost employers dearly when they don’t have an adequate employee structure that will support and protect the business.
Our 4th blog we will deal with Booth Rental Agreement. And why it is so important to have a well structured one to protect your future. What it can look like for your business if you don’t have one from the IRS, your State or a judges point of view.
Kassidy’s Management Consultant
Filed under: About Us |