We are here to help you create a solid business agreement that alleviates the items that may be left unsaid or unplanned and helps to avoid unmet expectations, anger and frustration. The following is a set of questions that, as potential business partners, you can discuss to help you correctly set up and sustain a business. Creating a business agreement is one of the most important steps in helping you understand the mechanics of how your business will be managed and documenting the terms. While the list of items to consider in a solid business agreement is indefinable—every business is different—here is a great list of questions to discuss that can be put it in writing to avoid conflicts or misunderstandings.
- What organization type should we create- General Partnership, Limited Partnership, Corporation, Limited Liability Company?
- What should the name of the business be?
- Who will be the Registered Agent (the person that receives notices and other information from the business) & where is the company’s designated office?
- Who has authority to make decisions? Does authority need to be joint/unanimous or independent?
- Will actions of the business need to be unanimously approved, majority, manager limitation? (e.g. both of your signatures on checks, etc.)
- What will each contribute to the business-monetary, time, etc.?
- Which way should the business be taxed? As a business: S-Corp, C-Corp, accounting method?
- Transfer Restrictions-Should you have the ability to: Limitability to transfer ownership to spouse/children or third parties? How to value the transfer? Typically book, appraisal, or yearly set. If someone filed bankruptcy or had other creditor problems, do you want to safeguard against their interest in the business being sold to someone else?
- What happens if a partner withdraws or dies? Should the other partner have the right to purchase due to divorce, disability, death, retirement? If someone passed away, would you be okay having their spouse or children step in as part owners?Do you want to put in some automatic rights to purchase the other business partner’s interest to protect against any of the items raised above?
- Dispute resolution - will mediation or arbitration be required before a lawsuit is filed?
By addressing each of these issues with your potential partner before committing to go into business together, you’ll have a clearer idea of how well you will work together and be better equipped to deal with challenges that may arise.
Echo Hawk & Olsen can create a business agreement that outlines all of the critical areas of the business. Please give us a call and let us help you successful begin your new adventure.
