Starting a business? You Need a Business Prenup.
Just like a marriage, a business with a partner or partners is very much like a marriage—but without sharing a bedroom. There are many benefits to handling a business prenup on the front end, rather than when you have no choice but to do it parting ways. Doing this on the front end will save you time, money, and acrimonious feeling towards any one party.
Imagine having to deal with the daily headaches of running a business, and having to deal with a bad breakup and falling out at the same time. Far from your ideal situation.
It is also not uncommon for couples that are spouses who become business partners at the same time. It is still advisable to get a business prenup. Say one partner is fronting all the money and the other has sweat equity. This separates your work contractual agreements from your personal life.
Here are some great reasons to get a business prenup or operating agreement:
- The partners decide what’s yours and what’s theirs without having the state or expensive attorney fees do it for you.
- It can save your relationships and friendships in case there is a dispute or a falling out.
- It minimizes possible disruption to your day to day operations.
- The details of the profits and proceeds are worked out in advance, as well as the business liabilities.
- It puts a succession plan in place in the event one of the partners passes away or becomes incapacitated to perform their role.
- It can also put an exit plan in place in the event one or more partners want to sell their share of the business. It also stipulates the allocation of shares in the company and the voting rights.
- It is beneficial for the valuation of your company in the event the business is going to be sold.
- It gives each partner a scope of work and clear lines of responsibilities. Who is in charge of the employees, back end office dealings, as well as the owners’ terms of employment.
- If the business wishes to expand or add more members to the business, this business prenup tackles this in advance.
- It shields you from your business liabilities and your spouse’s if the business goes under.
Conclusion
As a responsible business owner, you will want to ensure the long-term success of your company. This is only a small step in the right direction to help ensure that. Make sure to hire an experienced business attorney who will guide you by asking the right questions for your specific situation to cover all the unique aspects of your new business venture.
Ultimately, the cost of preparing this type of operating agreement will be minimal compared to litigating this in court.