Basic Training: About Business Partners

By Nina Kaufman, Esq.

This week’s training is what I call “partner training” (sometimes not unlike potty training). What can we expect from our business partners (Reasonably, that is)?

Q.: Are there time and performance standards for entrepreneurs starting a business? How much of a time commitment would be expected for partners starting a business together?

A.: For many entrepreneurs, the answer is “whatever it takes.” If you intend to start a business and clock in and out like you’re the mailroom clerk, don’t go into business for yourself. You need to have a very open and candid conversation with your partner-to-be to discuss your expectations of each other. Are you both planning to work at the business full-time? Have you clearly determined what roles each of you plays for the business and how much time each day that takes? Do you have obligations outside of the business that you cannot change (e.g., child or family care responsibilities)? Can you work from home? There are no set standards, but if you’re both planning to work at the business full-time, you need to decide what “full-time” really means for each of you.

Q.: What would be the best thing we can do when our partners ignore us in the middle of business falling down? I am currently in the advertising business. We are eight partners but unfortunately two of them left us at a time that our business was in the survival stage. The president got 90 percent of her share without us knowing that she would take it; the other was not able to complete her share until now. We have survived and these two people are claiming that they are still part of us knowing that the business is operating again. Do they still have the right as members? Please enlighten me with legal actions about this.

A.: Not sure I understand all of the details, but in short, there’s a big mess. Which usually arises when there’s no partnership agreement among the owners to clearly indicate who has what share of the pie. Problem is, once someone’s an owner, you can’t fire her as if she were an employee. You have to buy her out (or push her out, depending on whether she’s harmed the business). Do so before the business starts to take off. If the other partners were merely passive investors, whose only expectation is that they would provide money (and not active involvement in the business), you can offer to buy them out, but they haven’t done anything wrong as long as they provided the money they promised. Sometimes it’s better to walk away and start all over again. If there’s no real money in the business and no agreement among the owners about the right to solicit clients and use the company’s intellectual property, you may want to dissolve the company and create a new one with the business partners you can truly rely on.

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