-Business partners play important roles in the success of a business, including filling key roles, bringing new clients to the business, keeping the business in balance and on target. As things change over time, keeping partners happy and the business on track is an important strategy for business continuity and Adam Daner, the Atascadero attorney from Daner Law Firm has some important reasons why reviewing partnership agreements is critical to business success.
The original business agreement most likely defines timelines for periodic reviews, such as annually, upon written request of one or more partners, or certain circumstances that trigger a review. Defining periodic reviews in the original agreement is important, but there can be other circumstances that warrant a review as well.
Life changes and sometimes those life changes effect the business. A serious injury or illness that change a partner’s ability to contribute to the business; a change in a partner’s finances such as winning the lottery, or filing bankruptcy; changes in the business’s profitability; married partners getting divorced or a partner considering retirement are all circumstances that can trigger a review of the most recent partnership agreement.
Just as a business is a living and growing entity, successful partnership agreements serve all parties the best when they are considered a vital part of the business and all of the partners. Starting with a solid partnership agreement helps avoid problems in the future, but the possibility of an unforeseen situation cannot be discounted.
Starting off with the most thorough partnership agreement as possible is the best strategy. Starting a new business is demanding. Getting all of the start-up details under control is time consuming and a formal partnership agreement often slips down the “to do” list. After all, you are good friends and trust one another, right? Even the best of friends can’t remember every detail that was agreed upon over a handshake. As soon as possible, visit an expert business attorney, such as the Atascadero attorney at Daner Law Firm, and get the partnership agreement formalized.
Circumstances that may require a partnership review include:
- A partner is being sued and potentially exposing the business to liability.
- A partner is getting married or divorced. Does this expose the business to community property laws?
- A partner wants to sell out. Does the original partnership agreement address how this transaction is conducted? What are the other partners’ rights of first option? Can the other partners refuse a partnership offer for an outside party?
- One or more partners disagree with a business decision. What recourse do the dissenting partners have?
- Adding a new partner may mean reviewing existing partnership agreements
- Does a change in profitability affect partners and how?
- What is the process for changing the direction of the business? Who has the final decision to add or drop new products or services?
- How does acquiring another business affect the partners?
Partnership agreements protect each partner and the business but are only one layer of protection. The legal entity of a business is also important for making sure partners as well as the business are protected from certain liabilities, are complying with the IRS and State of California partnership laws, and many more business details that may be overlooking in the demands of starting a business.
The best strategy is to get legal advice for partnership agreements, insurance policies, the best legal entity, and other matters before launching a new business. When these kinds of preparations haven’t happened, get legal advice as soon as possible.
The Atascadero attorney, Adam Daner, has extensive experience in all matters of business law and can help start a business off on the right foot, or provide the right advice for guiding an existing business in the right direction. In practice since 1994, Adam Daner has focused on business law, contractual matters, estate planning, construction and real property and other related legal matters. Mr. Daner advises businesses and individuals with acquisition negotiations, contract drafting, leasing, landlord/tenant roles and responsibilities, licensing requirements and entity formation.
Daner Law Firm
4555 El Camino Rea, Unit J
Atascadero, CA 93422