1400 Gables Ct #103 Plano, TX 75075
5601 Bridge Street, #300, Ft. Worth, TX 76112

Partnership Agreement Do’s and Don’ts: A Dallas Business Law Attorney Provides Perspective

Dallas business lawyer, Richard “Ric” Armstrong, discusses the potential pitfalls when close friends start a company together, and how to avoid them. 

Few things can end a good friendship quicker than a business deal gone bad. Conversely, few things can ruin a company faster than a good friendship cracking under stress and strain.

Granted, many great companies have been started by great friends, but sometimes even the most hopeful efforts crash and burn. And sometimes they succeed beyond the wildest dreams of their founders… prompting big battles over strategic direction and money. Without a solid partnership or operating agreement in place, the business as well as the underlying friendship can suffer. If you’re considering starting a company with a close friend, here are some do’s and don’ts to consider.

  • DO put everything in writing; DON’T be vague. Blurry boundaries might work in a friendship context, but they can be devastating to businesses. If in doubt, spell it out. Once it’s in writing, honor the agreement and don’t cut corners.
  • DON’T avoid establishing decision-making protocols. This factor is especially key with two partners because any disagreement constitutes a tie vote. You can establish one person as the final say, divide up the decision-making responsibilities, and/or determine that important decisions can only be made by consensus. Your options are varied; just don’t wait until there’s a disagreement to decide who’s in charge.
  • DO establish roles and ownership stake. Hand in hand with the previous point, make sure each partner is clear about his/her role in the company, how much investment each one brings to the company, and what percentage of the company each person owns.
  • DO write a detailed exit strategy; DON’T skip this step! No one wants to talk about the “breakup,” but virtually all business relationships end at some point, whether by death, divorce, bankruptcy, or by  choice. If you want your friendship to outlast your partnership or other entity choice, set up a clear written protocol for what happens when one of you wants out.

To ensure you’ve covered all the important bases in your partnership agreement, consult with a Dallas business law attorney for advice. For more information, call Armstrong The Law Firm, P.C., at 972-424-L-A-W-S (5297).

www.planobusinesslawyers.com

Richard L. Armstrong, Principal

CLICK HERE FOR OUR FIRM RATINGS VIDEO

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest Posts

Address

Armstrong The Law Firm, P.C.
Plano Location
1400 Gables Ct #103
Plano, TX 75075

Fort Worth Location (By Appointment Only)
5601 Bridge Street, Ste. 300
Ft. Worth, Texas 76112

Phone: (972) 424-5297