The start of your business is the best time to anticipate and to prevent future problems with business associates. It is common for people to plan for marriage with estate planning and premarital agreements, to improve marital stability by removing unneeded apprehensions and third-party interference in a death or divorce. However, many business people ignore those same considerations when they are establish their own business “marriage.”

We know you, like most business people, are reluctant to force tough decisions at the beginning of the business. It’s easy to understand why. You either have known each new business partner well or have tried to select carefully. The beginning of the business relationship is generally a love-fest, with everyone optimistically looking ahead. No one expects the business to struggle unreasonably or to fail. Otherwise, you wouldn’t bother with it. You also are probably reluctant to offend your new business partner by discussing possible problem areas, fearing that this will imply that you don’t trust the other person. Each future partner is, obviously, someone you trust and whose word you believe you can take to the bank. So why rock the boat? Finally, many entrepreneurs are impatient with the formalities of business organization.

But stuff happens. People die, retire or divorce. Businesses struggle. Relationships erode. Family members intrude. You may have seen eye-to-eye with a business partner, but you may not have such a mutual trust with your former partner’s heirs or successors who are thrust on you.

Failure to plan is like building a brick building without mortar. It may survive for a while, but weather and tremors will ultimately bring it down. Advance planning can add the mortar to your business structure and prevent or minimize the affects of negative happenings. Discussion of issues at the beginning is intended to solidify, not to damage, the relationship. A formal agreement is not primarily to protect against a business associate’s dishonesty. If that were the case, you wouldn’t want to deal with such a person, regardless of the ironclad agreement language. The principal purpose is to clarify, at the outset, what everyone’s expectations and responsibilities are. If you make a verbal agreement and, the next day, question each person separately about the details, there will be differences of recollection. That is simply human. Think how those differences in perception can be magnified over time! An agreement allows you to determine beforehand, and to have a point of future reference, concerning your rights and responsibilities.

Some issues to consider and to document include the following:

1.    What is each party expected to contribute?
2.    How is the business going to be managed and controlled?
3.    What happens if someone, purposely or through circumstances beyond their control, doesn’t perform the expected obligations?
4.    Upon your death, do you want your spouse to be bought out and have money to live on or to continue in the business?
5.    Likewise, although you get along with a partner, how well would you get along with a deceased or divorced partners’ spouse in a continuing business? Do you want the right to purchase that person’s interest?
6.    How should any such arrangement be funded?
7.    How are you going to deal with a partner’s retirement? Deciding on these issues in advance will allow you to focus on the business and limit the severity of future business storms and tremors.