Last night, I was having dinner at a bar on the Upper West Side. I couldn’t help but overhear a conversation from the table next to me. The gentlemen were (civilly) discussing a business partnership that had gone bad. They had a “handshake” deal that started out with great dreams together (“You used to say ‘our’ and ‘we.'”) and somehow along the way things changed. There was a dispute in ownership, responsibility, creative rights and intellectual property, public credit, veto power, and profits…
I sat there with my hot Mexican Coffee drink (hey – it’s really cold in New York City this week) shaking my head and thinking about how prevalent partnership disputes are– both inside and outside the agriculture industry. After all, business partnerships are oftentimes formed with people we know and trust. (“We have a gentleman’s agreement.”) It is important to understand, however, that some partnership disputes arise from confusion. There is not a better exercise to make sure partners are on the same page than memorializing the agreement.
“But I blew my holiday cash on after-Christmas sales. I cannot afford to pay thousands of dollars for an attorney to write a 30 page partnership agreement.”
Hey, you’re not alone. I enjoyed my post-holiday spree at the Tanger Outlets in Tuscola, Illinois. First, who said the partnership agreement needs to be long and complicated. Perhaps it is appropriate — perhaps it is not. Second, there are several ways to keep your lawyer bills down (stay tuned for a future post on this topic). I suggest sitting down with your partner(s) and memorializing everything that you can on your own — this will be a healthy exercise and save you attorneys’ fees. Afterwards, email it to your attorney to review/edit in accordance with the partnership law in your jurisdiction.
“But I still cannot afford to pay an attorney.”
That’s understandable. It depends on your risk appetite. I still suggest sitting down with your partner(s) and memorializing what you can. The default partnership rules in your state will likely apply to any silent issues in your partnership agreement. Additionally, you take a risk that certain provisions may not be enforceable in your state and there may be issues that an attorney may raise that you didn’t think about. Nonetheless, it’s always better to put terms of an agreement in writing. I will be hosting a webinar on partnership agreements on January 13, 2012 that may better inform you on the issues.