An entrepreneur in Virginia who has plans to start a business may have a friend or family member who was involved from the outset and now expects to be a partner. While sharing ownership of the small business may sound like the ideal situation at that time, there is a reason why some say business and friends or family should not be mixed. Certain precautions may protect an entrepreneur in a partnership.
While a business owner may feel uncomfortable to ask a family member or friend to sign a partnership agreement, it is typically the best way for a businessperson to protect him or herself from a partner's actions. The partner will likely agree that roles should be defined clearly and that the expectations of each be specified along with their respective ownership interests. Being proactive can prevent disputes in the future, or at least indicate how disagreements will be resolved.
Debts can ruin small businesses, and limiting the amount of debt to which each partner may commit on behalf of the company may prevent one partner being held responsible for the debts of the other one. Both partners can, of course, authorize any amounts exceeding a designated limit. Although it may be difficult financially, investing in an appropriate insurance policy will add an additional layer of protection. Exit strategies are essential and including what will happen upon one partner's death -- or one partner leaving the business -- in the agreement, along with buy-out terms, can ensure fair terms for all.
When considering a start-up business, a Virginia entrepreneur may benefit from discussing ownership issues and related concerns with an experienced business law attorney. After assessing the business plans and other available information, a lawyer can provide salient advice and explain the options with relation to partnerships. A seasoned attorney can also assist with drafting a business agreement and ensure that nothing is left unaddressed.
Source: FindLaw, "How To Protect Yourself In a Business Partnership", Jennifer K. Halford, Accessed on Nov. 23, 2016