partnership

September 9, 2005 11:38 AM

Good book for learning about setting up partnerships?

I am entering a business partnership with a very good friend, and I would like to learn what legal formats we can put together that would protect us as a partnership and each of us individually. I am afraid of what will happen if we don't get along later on down the line, the partnership becomes unequal, or we run into financial difficulties. Recommendations about different resources for learning about this would be greatly appreciated.

posted by blueyellow to Law & Government (5 answers total)

Nolo Press has a book that might serve. You're right to formalize your partnership agreement; disputes later can really suck any value out of whatever you build. After you read up and have a good idea of the things you want to set up, a visit to a lawyer can also be worthwhile.
posted by spacewrench at 11:55 AM on September 9, 2005

There are a ton of threads on AskMe regarding starting various types of business that can help you, so I won't rehash those. But, I do want to touch on one point:

I am afraid of what will happen if we don't get along later on down the line, the partnership becomes unequal, or we run into financial difficulties.

The basic answer is that it depends on who owns how much equity. If you split stock in the company (yes, your company, no matter how small, will have "stock") 50-50, you're in it together as equals, through thick or thin. The only way to change this is for one person to have more equity than the other. Of course, this effectively means that one person controls the company.
posted by mkultra at 12:20 PM on September 9, 2005

If you're really serious about forming a partnership and you don't want to get screwed later on, I suggest you and your potential partner hire seperate lawyers and let them duke it out. IAAL, and with this one, I've got experience. If you're worrying NOW about inequalities and financial difficulties, you're ahead of the game. That said, you need a lawyer. A lot of people do assemble partnerships on their own and successfully file the documents, etc., but often end up being screwed when the partnership splits up.
posted by MeetMegan at 12:52 PM on September 9, 2005

Go to a lawyer!!! You've already spotted all the potential problems, and that's the first step. If you are investing any money at all in this, or exposing yourselves to liabilities, you need serious legal advice that books just can't give you.
posted by MrZero at 10:06 PM on September 9, 2005

I have one piece of advice for you - assume it will end badly (i.e.: one of you will want to leave, and you'll argue about fair terms for doing so), and figure out before that happens how you'll preserve your friendship anyway.
posted by Caviar at 8:08 AM on September 10, 2005