A business with a partner or partners is similar to a marriage—except you don’t have to share a bedroom. There are numerous advantages to negotiating a business prenuptial agreement in advance rather than when you have no choice but to do so after you split ways. Doing so ahead of time will save you time, money, and resentment against any one party.
Imagine dealing with the day-to-day stresses of running a business while also dealing with a nasty breakup and falling out. You’re not in the best of circumstances.
It’s also not uncommon for married couples to form a business partnership at the same time. Getting a business prenup is still a good idea. Assume one partner is putting in all of the cash and the other is putting in some sweat equity. This distinguishes your work-related contractual obligations from your personal life.
Here are some compelling reasons to enter into a business prenuptial agreement or operating agreement:
- Without the state or expensive attorney expenses deciding what’s yours and what’s theirs, the partners decide what’s yours and what’s theirs.
- It has the potential to salvage your friendships and relationships in the event of a disagreement or a fallout.
- It reduces the chances of your day-to-day activities being disrupted.
- Profits and proceeds, as well as corporate liabilities, are all calculated ahead of time.
- It establishes a succession plan in the event that one of the partners dies or becomes unable to perform their duties.
- It can also set up an exit strategy in the event that one or more partners decide to sell their stake in the company. It also specifies the distribution of corporate shares and voting rights.
- It helps to increase the value of your company in the event that you decide to sell it.
- It establishes a clear scope of work and duties for each partner. Who is in charge of the employees, the back office, and the terms of employment of the owners?
- This corporate prenup addresses this in advance if the company chooses to expand or add more members.
- It protects you and your spouse from your business’s responsibilities if the company fails.
As a responsible business owner, you will want to secure your company’s long-term prosperity. This is just a modest step in the correct approach toward achieving that goal. Hire an expert business attorney who will advise you by asking the correct questions for your individual scenario in order to cover all elements of your new venture.
In the end, the expense of drafting this form of operating agreement will be insignificant when compared to the cost of going to court.
Contact attorney David Frangos of Frangos Legal LLC if you would like to discuss a new or existing business “prenuptial agreement”. Schedule a consultation and case review by emailing us at [email protected], by telephone at 317-348-2150, or by booking online.