Business Partners


How Long Should you Date Someone Before Getting Married (in the Business Way)

We do not practice in the area of family law. Marriages breaking down, custody battles and splitting up people’s hard-earned assets is not an area of law that “spoke to me” in law school (although I have the highest regard for those who are able to practice in that area effectively). Having said that, we do practice in the area of corporate law and we see many cases where the business relationship between parties has broken down and they now need to exit. There are some things we have noticed over the years.

Business Partners

The first thing we noticed is that people’s courting procedures in the business world can be a lot less fulsome than they are when searching for romantic love. Business partners can be thrust together because one has the opportunity, and the other has the assets. They can also be thrust together because they are great friends and, of course it would be totally cool to work together, day in and day out.

Sometimes they are colleagues who think that they can do business better if they join forces. Sometimes they are blind dates, as in “I know someone who would be a great business partner for you”, when the person making the introduction does not really know both (or all) people well, and/or have a great understanding of the nature of the business.

So, how should people go about selecting a good business partner? Well, I would take a page out of the book that many churches have when they offer marriage courses.

Completing a marriage course does not guarantee that the marriage will be a success. What it does do however is make the parties think about issues that can arise, and have them problem solve those issues ahead of time. They make the couple talk about financial matters, their values and issues that might arise as you raise children (this one is akin to building the business). There is no reason why choosing a financial partner should be any different.

Potential Business Partners

In my opinion, the first thing that potential business partners should know about/talk about is values.

  • Are the potential partners, whether they be shareholders or partners in a partnership, aligned as to the business’ value-proposition?
  • If the business is service-based, do the partners share the same philosophy regarding how the services are to be offered?
  • What are the values regarding profits; are all profits going to be taken out by the parties as and when they are earned, or will they be re-invested into the business?
  • What is the end-game: profits or work-life balance?
  • Where do each of the partners see the business in a year, five years, fifteen years?

A good frank discussion about each person’s values in business, before going into business, will go a long way towards setting the stage for a successful business arrangement. We sometimes shy away from having these discussions because we want the business arrangement to work. However, having these discussions before jumping in with both feet will ensure that the parties will start out on the right track. We would even recommend that the parties seek a professional, such as a business coach, who can help facilitate those discussions.

Document Their Agreements

Once those conversations have been had and the parties want to push forward with the marriage, they need to document their agreements.

  • Write out your business plan.
  • Write out what the expectations are of each party.
  • Write out your goals, both short-term and long-term. This piece of writing does not need to be fancy; you are not going to publish it.

However, putting things down in writing

I. makes them real, and

II. improves your ability to focus on those goals.

I know, it’s not sexy or particularly fun. The fun part is thinking of how successful the business is going to be. However, think about how much more fun you will have when the business is actually a success.

Shareholders Agreement

And finally, the not-so-fun part of getting into business with someone is putting together a divorce plan. We always stress to people that having a well-drafted shareholders’ agreement is vital. In an ideal world, you will never look at the shareholders’ agreement after it has been drafted, because the parties are so well-aligned.

If however, you find that, despite taking all the precautions, you can no longer continue in the business marriage, you can have as amicable a divorce as possible, because the procedure for one person exiting the business has been laid out ahead-of-time. And, keep in mind that some exits are circumstantial (such as death or disability) and out of the parties’ control. It is so much better to have a plan to deal with those circumstances, rather than trying to figure it out as you go, when you are already dealing with a difficult situation.

It is completely understandable that the cost of getting a shareholders’ agreement or partnership agreement can appear to outweigh the benefits because, let’s face it, no-one goes into a business relationship with another person thinking it will fail. However, nobody gets into a car thinking they will get in an accident either; but we still have to pay for insurance. When looking at all the costs involved in starting your business, carve out some “investment” in putting in place a proper shareholders’ agreement or partnership agreement. If you cannot imagine spending the money on those agreements, you might want to re-consider whether the business arrangement you are contemplating is the right one for you at that time.

Contact Frederikse Law

Have questions or concerns about business relationships, please feel free to contact us at Frederikse Law 289-813-2671. We are conveniently located at 4391 Harvester Road Unit 5A in Burlington.

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