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The legal implications of having a business partner

The legal implications of having a business partner
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The legal implications of having a business partner
Alex Lee by Alex Lee
Solictor - Buss Murton Law

Going it alone in business can be tough.  Having a business partner gives you someone to share the challenges – and the successes.  However, like all relationships, things can change.  As Alex Lee of Buss Murton Law explains, having the right legal agreements in place from the start can protect both parties and help ensure the success of your business.

Businesses are often stronger with more than one person at the helm: not only do you have someone to bounce ideas with and to motivate you when the going gets tough, but the strategic impact of the combined experience of partners is often much bigger than the sum of the parts. 

But even matches that are seemingly made in heaven can unravel.  It’s not uncommon for aspirations to change; even though you set out with the same goals for the business, you may find your partner wants to take it in a different direction, wants to move onto other things, or simply has new priorities in their personal life which mean they don’t want to give as much to the venture.  

That may not be surprising.  What may be more surprising is just how quickly this can happen; I have worked with businesses that have been going for quite a short time where the relationships have become acrimonious because one of the partners feels they are now carrying the other/s or there is conflict because their ambitions for the business are no longer aligned.  Unfortunately, in such circumstances, the business relationship often breaks down, with the partners focusing on one another, to the detriment of the business.  One of the most difficult situations is when no one has overall control (typically when two partners each have a 50% controlling influence), meaning the company or LLP becomes deadlocked.

The good news is that there are steps you can take to protect yourself and your partners.  Rather like a prenuptial agreement, these are best put in place from the outset; this may seem like an unnecessary additional expense when you are starting out, but they can save you a lot of legal fees and heartache in the long term.  And the even better news is, in contrast to prenuptial agreements, they are much more enforceable should you need to call upon them.

Among the most common solutions are shareholders’ agreements and partnership agreements.  It’s worth taking proper legal advice to make sure you put the right agreement in place for your company structure, setting out what expectations each party has of the other.  Although this won’t prevent ambitions and interests changing, thinking through the issues at the outset will mean that – when things do change – there is a mechanism in place to allow business continuation and preserve the value of your business.

Most commercial legal advisers will give you some time on the phone to discuss your options and help you decide how to proceed.  But investing in the right legal agreement from the start will increase your chances of business success.

To find out how   Capital Space business premises  could benefit your growing business,  call 0800 107 3667

Alex Lee is a Company & Commercial and Employment Law Partner at Buss Murton Law, which has been providing expert and trusted legal advice to individuals and businesses for generations.  With offices in Tunbridge Wells, Cranbrook, East Grinstead and Dartford, Buss Murton provide legal expertise to clients across Kent, Sussex, Surrey and Greater London.