You’ve had four dozen breakfast meetings, numerous enthusiastic phone conversations, and you know you’re both completely in sync about your plans, goals, and vision. Now is the time to actually start that business you’ve been talking about forever.
Is the first step getting a business license? Forming a legally-sanctioned entity? Renting office space? Seeing a lawyer? What about creating a business pre-nup? After all, it’s not unheard of for couples contemplating marriage to discuss a pre-nuptial agreement. Why not people contemplating starting a business together?
You might be wondering what makes a business pre-nup different from an operating agreement? Or corporate by-laws? Or a business plan? Good questions.
Your business pre-nup is not a boiler-plate template into which someone inserts your names, addresses, and nature of your business. It is also not a document that you would pay an attorney $2,500 to generate, although I’m not opposed to the concept that will, hopefully, result in an ironclad contract protecting you from each other and from third parties. I’m simply suggesting that it might not be your first step.
As a Mediator, I talk to potential business partners about avoiding the communication pitfalls that challenge many business partnerships. I ask many questions in a business mediation. What are your expectations about meeting with your partner? What is a reasonable time within which to return a phone call, a text, or an email? And instead of discussing stock issuance or annual meetings, I like to ask about loans, salaries, support staff, and family members. Conversations in this context would likely include topics such as visions and goals, outside resources for legal advice, marketing concepts, branding, advertising, and financial planning. I especially like to devote some time to discovering whether potential business partners speak the same language about money. If one is a spender and the other is a saver, future problems may erupt if not discussed in advance.
Most importantly, I do a considerable amount of LISTENING in an effort to help potential business partners to honestly, accurately, and nicely communicate with each other.
After the business mediation has concluded, I will prepare a written document stating all of the agreements reached in my office (also known as your business pre-nup). That document, once signed and notarized, becomes a binding legal agreement and the stepping stone to your new business engagement. No diamond ring necessary! The written contract may also become a resource for resolving future conflict. If one of you isn’t abiding by the terms you’ve agreed upon, it can be pointed out in a relatively kind way with the goal of having a conversation to figure out the method of repair.
Civil courtrooms are overflowing with business litigation where preventative measures might have avoided a lawsuit. Relationships, whether business or personal, thrive on communication and meeting of expectations. A business pre-nup can be a key tool in avoiding unnecessary, expensive, and protracted lawsuits that ultimately destroy relationships and dreams. When you think about it, a business pre-nup makes a lot of sense, doesn’t it?