Avoid Common Partnership Conflicts with a Lawyer

31 May 2023 · 1 min

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In this video, the speaker emphasizes that money changes partner dynamics and recommends using a seasoned attorney to draft a comprehensive partnership or operating agreement. The lawyer can help define equity splits based on differing capital and labor contributions, decide on voting structures (equal, simple majority, supermajority), and set thresholds for key decisions such as adding new partners. The agreement should also address buy‑sell provisions, including a right‑of‑first‑refusal clause to protect existing partners. Financing choices—bootstrapping versus loans or outside investors—are highlighted as potential sources of conflict, and a lawyer can guide partners in planning for growth opportunities. Finally, the speaker notes that confidentiality, non‑solicitation, and non‑compete clauses are essential protective measures that should be incorporated into the partnership agreement.

Chapters

Once money is involved, people's behavior can and will change. An attorney can create a partnership or an operating agreement that covers the amount of equity split. If you have multiple partners and varying investments of capital and labor, who has what equity percentage? Do you all have equal vote, simple majority, supermajority? What is required for key decisions like adding a new business partner? Buying and selling equity and shares. An agreement covers the worst-case scenarios, including you as a partner having the right of first refusal clause providing you with the first stab at buying their shares. Another area to consider is financing. Who's financing? A partner might want to bootstrap, but maybe you, you see a huge growth opportunity and you want to get a loan and get investors in ASAP. These scenarios will come up, trust me. A seasoned lawyer can guide you in this space and help you and your partners consider these questions in advance. Other things a lawyer can help with in creating a partnership include considering confidentiality, non-solicitation, and non-compete agreements.