Avoid the "Handshake Agreement"
Proper documentation is crucial for multi-owner businesses to ensure protection and clarity for all parties involved.
When any type of business entity has more than one owner, having the proper written documentation is essential. Some entrepreneurs are reluctant to take this step as it may be seen as a lack of trust. On the contrary, written agreements demonstrate good business and are designed to protect all parties involved.
Written documentation, such as partnership agreements, operating agreements, and shareholder agreements, clearly outline the roles, responsibilities, and expectations of each owner. This helps prevent misunderstandings and conflicts by providing a reference point for decision-making and dispute resolution.
Additionally, properly written agreements can address important issues like profit distribution, ownership percentages, and procedures for adding or removing owners. By establishing these guidelines upfront, business owners can focus on growing their enterprise with confidence, knowing that their interests are safeguarded.
Business owners usually split with one another eventually. Sometimes it is a friendly split, but sometimes it is not. When the business relationship is not in writing, each owner has a different opinion concerning who owns which business assets and how the business should be divided. Having the agreement in writing reduces potential conflict.
Your business is important to you. Let us help you protect your business by advising and helping you set up your company, preparing contracts that help protect your interests, or preparing for the sale or transition of your business.
Please call our office at (888) 887-4170 if you have any questions about this article.
Proper documentation is crucial for multi-owner businesses to ensure protection and clarity for all parties involved.
