Legal Mistakes Affecting Business Partnerships

One of the reasons why people like making business partnerships is because they will be taking half of the responsibilities of their shoulders. However, sometimes making a business partnership can be a bad thing because there are much higher chances of making a permanent mistake.

Having a business partner can have its own advantages that can make things much easier and simpler. Things like splitting equally the capital are very important for some people because their business idea might require a lot of money in order to function properly. When you have two people investing in one thing, you will be having more attention on the quality. Splitting all the responsibilities is another great thing about having a business partner because you will have much more free time on your hands.

Sharing the Capital

If you are having a business partner it is normal to both of you split the capital. However, if you have forgotten to make a formal agreement at the beginning of your partnership, you might have problems splitting equality the capital expenses. You should never trust someone on their word that they will deliver something especially if it is money involved. You must always have a contract that will protect you from any scams or other issues with the capital. In contracts like that, you will see exactly who must pay how much money.

Lack of Operating Agreement

One of the major mistakes that new business owners do when they start a partnership is that they don’t create any kind of operating agreement. When they realize, what mistake they did it is usually too late and nothing can be done to save the business from failure. The operating agreement is specially designed to protect both parties and the business from issues that can occur. If you don’t have such agreement, there is a high chance that the two of you will have a court case because you will not be able to solve the issue any other way and usually all the lawsuits are leading to the breakdown of the business.

If your operating agreement is carefully made, you will not have almost any problem with dealing and splitting the business responsibilities. The agreement will have a lot of important things written in it such as who of the two partner is having the determining vote.

Planning for the End

Experts have said many times that the best time for preparing for the breakdown of the business is from the start. That is because in the beginning both of the owners will have a same or at least similar idea of their business. You should include planning for the end of the operating agreement, that will help you decide what will happen if one of the parties decide to leave the business. In a lot of cases that is the biggest problem, when they don’t plan for the end and when it comes they don’t know what to do or how to act properly in order to save the business.