business partner dispute resolution

Importance of Agreements Between Business Founders

A Properly Drafted Business Agreement Can Add Health to Your Company

Agreements Between Business Founders

When beginning a new business venture, most entrepreneurs have a handle of the importance of properly forming a business in terms of selecting a business structure such as a partnership, a limited liability company or a corporation, and filing with the State to gain legal existence.

A much smaller group understand the importance of having a partnership agreement, operating agreement or shareholder agreement between company founders. I have seen a few situations where the lack of such an agreement has caused struggle between business founders, even leading to failure of that business.

Business founders need to budget some cost for a basic agreement to document terms such as ownership structure and rights, voting and decision-making rights, management responsibilities, and buy/sell provisions or rights of first refusal when one founder decides to make an exist, among many others. Having a well drafted agreement that brings up major points the business founders have not even consider is very important and can save a lot of time and money in the long run.

An agreement is no guarantee of business success or that issues between founders will not arise. However, having an agreement in place that is specific and decisive can squash many smaller issues before they grow into bigger problems.