For many, one of life’s most exciting events is when two or more people decide to start a business. Everyone is energized and laser-focused on how the company will operate, its capital needs, income and expense issues, allocation of responsibilities, and all the other essential pieces involved with a new venture.
At the outset everyone involved are typically on good terms (obviously, or they wouldn’t be joining together), so nobody wants to think about negative issues such as:
- The business not being successful
- The business runs low on or out of capital
- The death or disability of a key person
- One or more individuals become disgruntled once the venture begins
Addressing Issues When Going into Business
We also find that many clients believe such issues couldn’t possibly arise when the partners involved in the business are family members but this often actually increases the likelihood of problems.
Even if the parties think about addressing such issues, nobody wants to spend the money for the attorney to help address them up front, because every dollar is needed for the start-up. As a result, if (or more likely, when) any one or more of these problems arise, everyone inevitably ends up spending much more to resolve them.
Any attorney with experience in the closely held/family-owned business arena will tell you that one or more of these (and other) situations eventually occur in virtually every business venture. Although forcing the parties to plan ahead can be difficult, stressful, and involve some expense, that stress and cost will likely be exponentially greater for those who fail to plan in advance.
What Does “Planning” Look Like?
Irrespective of whether the business venture is organized as an LLC, corporation, or partnership, every such business should, as a part of the start-up process, have an appropriate agreement in place to address the potential events that could bring down the company and/or damage or destroy what were once family or friend relationships. Certainly, such an agreement will never guarantee an “all’s well that ends well” result. Still, it will at least provide a structure under which unanticipated circumstances can be addressed with less stress and cost than would be the case otherwise. There are multiple ways to structure these agreements, and Carlile Patchen & Murphy’s business group has extensive experience helping clients develop and implement customized plans for your situation and needs. Please don’t hesitate to contact us to discuss how we might be able to assist.