Entering into a business partnership can be an exciting endeavor, as it allows for shared responsibilities, resources, and expertise. However, it is crucial to approach partnerships with careful consideration and clear expectations, and hiring experienced North Carolina business attorneys to help you with the formation of your partnership can help you protect your investment and take steps to avoid future problems. Here are the do’s and don’ts of starting a business partnership to help you navigate your new venture:
- Do Conduct Thorough Due Diligence. Before entering into a business partnership, conduct thorough due diligence on your potential partner. Examine their financial history, professional background, reputation, and compatibility with your business goals. Engage legal, tax, and financial experts to ensure a comprehensive evaluation.
- Do Define Clear Roles and Responsibilities. Clearly defining the rights, obligations, and roles of each partner helps avoid confusion and conflict.
- Do Create a Partnership Agreement. A well-drafted partnership agreement will outline the rights, obligations, and roles of each partner in writing. Address key areas such as profit sharing, capital contributions, decision-making, dispute resolution, and exit strategies. Engage a skilled business attorney to draft a comprehensive partnership agreement tailored to your specific needs.
- Do Work with Professionals. Working with professionals, including business lawyers, accountants, tax professionals, and others who will give you sound advice on all matters related to your partnership, providing a solid foundation for growing your business.
- Don’t Try to Do-It-Yourself. Although many free templates for your formation documents are available online, they often do not contain all of the necessary legal language to create an enforceable partnership agreement that protects the parties and the business.
- Don’t Neglect a Written Agreement. Relying solely on verbal agreements between the partners can result in misunderstandings, legal disputes, and unintended consequences. Investing in the creation of a written agreement up front will save time and money down the road.
- Don’t Forget the Exit. While it may seem counterintuitive, planning for the end of a partnership is an essential part of its formation. Define clear exit strategies for the partners, including buy-sell provisions, rights of first refusal, and non-compete clauses. Anticipating and addressing a potential partnership dissolution can minimize future conflict.
North Carolina recognizes several different types of partnerships. The type of partnership you choose depends on many factors. An attorney can help you choose between a:
- General Partnership – All partners have management roles and have unlimited liability for partnership debts and obligations.
- Limited Partnership – Limited partners have limited roles in the day-to-day operations, but also have limited liability for partnership debts and obligations. There must be at least one general partner, who is responsible for the company’s management and has personal liability for the business’s debts.
- Limited Liability Partnership – Provides limited liability for all partners while allowing all partners to be engaged in the management of the company.
Developing a partnership can be rewarding and profitable. However, doing so without legal advice could create problems you could not anticipate without a thorough understanding of the law.
Get More Information From Experienced North Carolina Business Attorneys
Our North Carolina business attorneys can help you with all matters related to your business, including business structure and the preparation of a variety of business agreements. Contact our law firm to schedule a meeting with one of our business attorneys today.