1. Everything Should be in writing, even if you are going into business with a family member or your best friend.
Unfortunately, this mistake is all too common. Repeatedly, people go into business with family members and friends without writing down the nature of the business relationship. Inevitably, one of the partners will exercise more control over the company. Meanwhile, the other partner will protest and say they did not agree to that when they started. After arguing back and forth for some time, either of the partners will reach a point where they finally decide to consult a business law attorney about what to do next.
One of the first questions that the business law attorney will ask is, “does your business have an operating or partnership agreement?” When the partner answers no, the business law attorney will explain to them that the root of their problems with their partner is that they do not have an operating or partnership agreement. Having a detailed operating or partnership agreement that clearly describes the duties and responsibilities of each partner will save you time money and potentially save your friendship with your business partner.
2. Be transparent with your partners.
Trust is the basis of all healthy relationships. Once trust is gone from a relationship, the nature of the relationship fundamentally changes. In our experience, most business relationships start to deteriorate when parties begin to keep information about the business with each other. Sometimes the party withholding the info doesn’t do so intentionally. Frequently, it’s an oversight. But these lapses, if not adequately explained, can lead to much larger arguments that can potentially destroy the business relationship. And so, small business owners must develop procedures that include periodic review of the business’s finances and operations by the partners.
3. Inform your attorney of potential problems sooner rather than later.
A mistake that business owners make repeatedly is that they wait too long to alert their business attorneys of potential problems with their business. Business owners sometimes mistakenly believe that they can solve most issues without counsel from an attorney. In our experience, we have found that the sooner that a client comes to us for advice about a problem in their business, the more effective we are in solving the issue before it evolves into something much more severe.
The hesitancy to seek counsel is especially true when family members and friends have a business dispute. There is a misguided belief that the parties no longer operate on friendly terms once an attorney gets involved. This belief is mostly unfounded. An experienced business law attorney will be able to guide you and your business partners through most legal issues. And if the matter escalates to litigation, having your lawyer involved in the process from the get-go will prove to be beneficial.