Problems with Partnerships - You Need a Business Pre-Nup for the Partners!
"As the Texas Supreme Court noted “occasionally, things don't work out as planned: shareholders die, businesses struggle, relationships change, and disputes arise. When, as in this case, there is no shareholders' agreement, minority shareholders who lack both contractual rights and voting power may have no control over how those disputes are resolved.” Because of the absence of a market in which to sell the shares, once minority shareholder oppression begins, these shareholders have nowhere to go with their hard-earned investment of time, talent, and treasure, but are “locked-in” and are vulnerable to attempts to “squeeze” them out (that is, to force them to sell at an unfairly low price) or to “freeze” them out (that is, to render their share ownership meaningless)."
How to Avoid These Problems: An Introductory Video from my Youtube Channel about partnerships!
And here is the full version of my partnership lecture including:
1. Partnership Formation.
2. Problems With Partners – A Business Prenup
a. Issues with death - probate of your partner's interest, disability of a partner, divorce and creditor claims against a partner where the creditor/divorce court now wants to force a sale and division of the business assets.
3. Partnerships and LLCs - What are the advantages of LLCs as a business structure?
4. Joint Venture Agreements vs. LLC as a partnership structure
a.Joint Venture Structure
b. LLC structure - why would I choose either one?
5. Management Provisions - who does what in the partnership.
6. Buy-Sell Agreements - why they are necessary.
7. Valuation methods: how are assets to be valued on dissolution? Should future value be included?
8. Securities Law Issues - What about raising money from a silent partner? What about family members putting money into a partnership venture?
a. When are federal securities regulations triggered?
b. What happens if securities laws are ignored?