A dishonest employee can result in substantial losses for your business, but a dishonest partner can cause your business to collapse.
If you are a silent partner, you have more to be concerned about than if you are a partner who participates in the daily operation of the business. If you live in a distant town or out of state, you have even more to be concerned about. It may be that your partner had every intention of being the best partner anyone could wish for. But if sales drop off or your partner develops severe personal problems, the good intentions may fall by the wayside.
Perhaps you went into partnership because your partner has a talent for a certain business that would return you 30% per year. The partner did not have the finances required to carry it off, so you agreed to step in and help. Perhaps the banker or franchise company required you and your spouse to guarantee any loans or future payments from the partnership. At first, these agreements seem innocent enough. But if your partner gets in financial trouble, the bank will be coming to you for payment.
Before going into any partnership, ask the following questions:
- Are you starting out with a properly drafted partnership agreement?
- Does your agreement specify how much time and money each partner will contribute to the business?
- What salary or draws will each be entitled to?
- What controls have been established to help insure that all assests are being accounted for? How and who will keep the books?
- What financial reports will be generated and at what frequency?
- Will family members of the partners be working in the business?
- How will they be compensated?
These are just a few of the questions that need to be addressed. Many business partnerships are formed without giving enough thought to all the possibilities that are likely to develop. It is just a matter of time until a partnership will come to an end. One partner may want to sell out, retire, or he or she may become disabled or die. The partnership agreement should address all these eventualities.
Contact Kenneth D. Eichner, P.C. We will gladly work with you and your attorney to draft an agreement for your partnership to help alleviate future problems.