When Is a Partnership Agreement Too Short?

Posted on December 26, 2013 in Business Partners, Planning & Advisors

Entrepreneurs often ask me to createthe “perfect one-page agreement.” Maybe they expect partnership agreements to be 3 pages . . . maybe 5 . . . but the expectation is that shorter is better. It ain’t.

Ryan Roberts, The StartUp Lawyer, makes this excellent point in his post about agreements-in-brief:

“[I]f a multiple-owner corporation’s bylaws are less than 7 pages, that tells me the corporation’s co-founders did not have enough discussion about how their corporation should be managed, operated, transferred, sold, or liquidated. Or worse, they did have the requisite discussion but failed to implement their discussion into their corporate documents.”

 

Like not getting a marital prenup because you don’t want to think about divorce before the wedding, not having a well thought out partnership agreement is akin to sticking your head in the sand like an ostrich.  Statistically, about 70% of all business partnerships end in “divorce.”  You can’t avoid these issues if you don’t talk about them:  what you avoid is the opportunity to come up with fair and creative solutions to the problems before they arise.

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