If you plan to enter a partnership with a close friend, you may think it's unnecessary to draw up a contract or file the appropriate legal forms for your business. Although it might not seem like the right thing to do, it's important to protect your interest in the business. If issues arise during your partnership, they can potentially cause conflict between you and your partner. Here are things to think about when you enter a partnership with a close friend.
What Should You Consider?
Whether you and your partner plan to start a retail store or construction business, it's important to establish a sound business plan for the company. The plan should contain everything you and your friend hope to gain or achieve during your partnership, including financial stability and success. If one or both partners don't agree on how to establish or run the business, the company may fail before it has a chance to succeed.
In addition, you and your close friend must agree on how to distribute the money earned by the business. If the partnership is equal, both parties should receive half of the earnings. But if one partner contributes more startup money than the other partner does, there may be some conflict on who owns controlling interest in the company. This conflict may cause unnecessary pain and suffering on both individuals.
You and your partner can avoid issues by seeking business legal advice.
How Do You Make Your Partnership Legally Sound?
A business lawyer or attorney can help you and your close friend develop a business plan that each person can agree on. The plan may give you and your partner a realistic idea of what to expect during each stage of your business. Knowing what to expect during each stage may help both partners stay focused and committed to the business.
A lawyer may also file the appropriate paperwork for your business. It's important to establish what type of partnership you and your close friend plan to enter. There are different types of partnerships, including owner-management, limited liability, and limited.
Because each type of partnership has its own advantages and disadvantages, it's essential that you choose one that fits both partners' goals. If you select the wrong type of partnership, it can be potentially devastating. For instance, if you enter a general partnership with your friend, you may be personally responsible for any debts or problems the other person creates in the business. You can avoid conflict or personal liability by having an attorney help you.
If you need to learn more about entering a partnership or choosing the best type of partnership, contact a business law attorney today.
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