If you are setting up in business, unless you are a sole trader, you will want to consider a partnership agreement. This is the document that will set out exactly what are the responsibilities and obligations of each person who has a stake in the business. Clarity in this area is very important – particularly as both the vision and the demands of both the business and the partners will change overtime.
For example, perhaps you have a great relationship with your business partner, but not with his / her spouse. If your partner dies, the spouse would most likely inherit his / her shares. How would your business operate in that scenario? A partnership agreement could state that in the event of a death of any partner, the other partners have the opportunity to buy the shares.
There are many things that can change the expectations of people involved in a business. A partner may wish to work less or change their area of responsibility. A new partner or director may be required as new areas of responsibility become clear. A family might be looking to transfer the business to the next generation, or the final generation looking to sell everything to the employees.
If you are looking to raise funds for your business by selling shares to investors, it is equally important that both parties understand their rights and obligations. Will a shareholder be entitled to a seat on your Board of Directors? Will they be able to sell their shares to whomever they want to, whenever they want to? Or would you rather they give you first refusal to buy them.
At Wallace Quinn, we specialise in helping our business clients create partnership agreements and shareholder agreements that are robust enough to stand the test of time and flexible enough to respond to ever changing circumstances.
Whether you are starting a business, selling a business, merging a business or reacting to a change in business circumstances, at Wallace Quinn we’re ready to help. Contact us to find out more.