Happy Valentine’s Day! Saint Valentine’s Day began as a liturgical celebration. In the Middle Ages, the day became associated with romantic love. Now it’s a time to scurry about, buying flowers, cards, chocolates and also making last-minute dinner reservations.
Romance is romance, and business is business. Many business owners, at their peril, treat their business partners, corporate shareholders and LLC members as if they were a kissing cousin of their Valentine. I’ve heard a variety of predictable comments over the years, such as, “We’ve known each other for decades, and we’ve always gotten along,” “I love [Fill in the Blank] like a brother,” “I know we would never fight,” and “I know this will all be okay.” Some say that love is blind. But you should enter into a business relationship with your eyes wide open.
Lovers, partners, husbands and wives may fight and dissolve their relationships. Business owners are no different. In a romantic relationship, the emotions associated with the break up can run deep. Similarly, emotional bonds between business owners can be intense, and the break ups can be every bit as acrimonious as the dissolution of a romantic relationship. When a romantic relationship ends, you’ve lost your partner. When your business relationship ends, if your business suffers, you may have lost your ability to pay your mortgage.
When you form a business with another person, and your heart is filled with optimism and good will, that is precisely the time you should agree upon a written plan for how to break up. Because the one thing that will never happen to you, well, it might happen. That plan needs to be spelled out in your partnership agreement, LLC Operating Agreement, or corporate Buy-Sell Agreement. These documents govern the key aspects of your business relationships so that the expectations are clear and, if someone dies, is disabled, wants to sell their interest, etc., there’s a plan in place to facilitate what happens next.
Will you mediate the dispute? Or will you tie up the business for a few years and spend six figures on attorneys’ fees associated with litigation? Will you spend massive time, energy and money fighting about how your business should be valued? Or will you have a written agreement in place spelling out the valuation process? How will the departing business owner be paid for his or her share? Will the owner demand full payment immediately, which will bankrupt and close your business? Or, will reasonable payments be made over a period of years pursuant to the terms of the promissory note that you agreed to in advance?
St. Valentine’s Day is the perfect day to buy flowers for the one you love. Why not invest in a well-crafted written agreement between business owners to protect the business that you love?
Photo credit: The Tax Haven on Flickr
Phone: (206) 784-5305
