You’ve found a potential business partner. Maybe even your spouse or another family member. You’re bubbling with ideas as to how you can work together to produce a fantastic new product or service. It’s an exciting time and ‘the legals’ often get forgotten as no one can imagine anything ever being needed and besides, it’s just an extra cost isn’t it? But if you don’t consider the following 3 areas carefully it could cost you so much more in the long run.

If you’re about to go into business together, don’t be shy about talking in detail about the following:

1. Business structure

Partnership? Limited company? Limited liability partnership? Or a contractual arrangement? There are a number of ways you can trade and share profits and losses in the business. Dependent on your circumstances there are tax advantages and disadvantages, differences in reporting requirements, the ease with which the business relationship can be changed or brought to an end and also the question of whether you want your information to be publicly available.

2. Document your expectations

Keeping arrangements ‘loose’ and ‘flexible’ are all very well BUT what if you both come away from a meeting with a different view of what has been agreed? Have you thought about profits, losses, investment, minimum time to be spent, decision-making, differences in opinion on direction? Whilst you may think that you’ll just be able to agree anything, at any point in the future, it’s surprising how polarised views can become, or how misunderstandings at the outset can cause big problems later. If it’s all written down, everyone knows where they stand.

3. Ending the relationship

Of course this couldn’t be further from your mind but it is so important to consider. What will happen if one of you dies? If your spouses or partners have a stake in the business, what happens if you divorce or split up? What if one of you becomes incapacitated, or your business interests are simply no longer aligned? Not thinking about these possibilities, and more importantly not documenting what will happen is so common and can result in not only animosity and stress but an unnecessary and lengthy Court case to resolve matters. I really cannot emphasise enough the importance of having this all decided and recorded in an agreement from the outset.

If you are thinking of going into business with someone – or are already in business and would like to get things in order, please get in touch.

Legal services for your business