Going Into Business with a Partner: Planning for the Disagreements

We get calls frequently from people that want to go into business together. Perhaps it is two friends, or two people that worked together and thought they could strike off on their own and be successful if they joined forces. There is nothing wrong with going into business with someone else, but if you fail to do it the right way, a lot can go wrong. One big issue to consider, when you will be equal partners with someone else, is what happens if you can’t agree.

Consider two guys going into business, and they each own 50% of the company. At some point, the two are going to disagree about something important – maybe it is whether to move into this market, or continue with this product or service, or maybe it’s about expenses. At some point, there will be a disagreement. What do they do? If they each have an equal vote, they’re effectively at a stalemate. And that’s bad for business, and bad for their relationship.

If they’ve set up their business wisely, they’ve got a plan in place. Through a Member’s Agreement or Shareholder’s Agreement, they have a plan in place that sets forth what will happen when they can’t agree. Maybe that plan vests one particular partner with the final say. Maybe they bring in a third party to help explore options and try to mediate, and if they can’t agree, the 3rd party decides. Or maybe they pull out a 1974 dime that they keep in the business safe, that they call their decision dime. And they flip it, following detailed instructions in their written plan. Whatever method they use, they follow a plan they put in place and agreed to, and this breaks the stalemate.

If you’re going into business with someone else, this is one of several issues to consider and make some decisions on how to handle. And this planning is best at the start of the business, or very early on. If you wait until there is a disagreement develops, odds are good that the partners won’t be able to agree on a plan.

If you’re looking at starting a business in Georgia, I invite you to request The Guide to Starting a Business in Georgia. It answers four frequently asked questions we receive about the process, and also answers three questions that people should be asking when thinking about starting a business in Georgia. You can request that by going to thebeckfirm.com, clicking on Free Info at the top, and then selecting the free guide and follow the instructions from there. If we can be of help, you can reach us at 678-344-5342.