Categories: Business Basics

Protect Your Partnership

Forming business partnerships comes with a variety of benefits and allows partners to share organizational responsibilities and financial requirements. However, partners in a general partnership don’t have any limit on their personal liability for the debts of the business. This means that the partner may have to use personal assets to pay business debts if necessary. Forming a business entity can protect you from these potential threats. In a recent Business Week article, John Gerber, a long standing business attorney, offers several useful pointers for partners to protect themselves in business matters.

The first is to “start at the end.” It is wise to decide from the beginning of the business partnership what will happen if one partner exits. The goal is longevity and prosperity but a business must be prepared for the worst. Garber relates it to a “pre-nup in a marriage.” Having a legally viable exit plan before it is needed, and before emotions and/or animosity is running high, is invaluable.

Deciding who decides” is the next tip. It should be a general rule of thumb to put anything to be taken seriously in writing, especially if it is concerning the decisions of a company. How a company is to be governed is no exception. It is important to write down what each partner’s responsibilities and level of control are, as doing so can spare major confusion and grief in day-to-day operations.

A vital tip is to “protect the personal.” Establishing a partnership as a legal entity (i.e. corporation, LLC, or LLP) from day one protects the partners from personal liability, so that their personal assets cannot be touched if something happens to the company. This is one of the major benefits attached to forming such a business entity.

Garber also advises to “assess your commitment.” Everybody in a partnership starts with ideas about their commitment, but sometimes life gets in the way. It is important to talk about competing priorities and to know how they’ll be handled if they arise. This creates a sense of fairness and trust that is needed for a good partnership.

Forming a business entity is a vital step in protecting against external business threats, and following Garber’s advice will protect partners from internal threats as well. Taking these early precautionary steps could be the key to a successful entrepreneurial endeavor.

See the entire article here:

Https://www.businessweek.com/smallbiz/content/sep2010/sb20100910_593885.htm

Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration. Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law. Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others. Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.

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