What If Agreements – get them in place now, before a what if occurs1 min read

Just this morning I heard another tale of woe from a business owner who is now entering into legal disputes because a partner is getting divorced. The business is ten years old, healthy, in fact, holds a strong position in a niche market. But, now the business will be sold or broken into pieces. Several lawyers are also enjoying a feast of fees. 

All of this points back to a fundamental of business formation and business planning – the need for “what if” agreements among the owners.

What if someone dies, becomes disabled, divorced, married, wants to leave the business? How are new partners added? Can a founder be fired? Who owns what and in what form? How will disputes be settled? And, the list of “what ifs” goes on.

So often people start businesses and, in the glow of start up enthusiasms they think, or don’t want to think, about the almost inevitable “what ifs”. They quickly go through setting up the incorporation process and get to work ignoring what will turn out to be all important, the Founders’ Agreement. 

If you are just starting out, make sure that you work through the discussions and legal work for a Founders’ Agreement within the first couple of months. Put your Founders’ Agreement in place. On the other hand, perhaps you have ten years of success in your wake and you still have no Founders’ Agreement (referred to also as Owners’ Operating Agreement and other title). You are living on borrowed time. Get together with your business partners and make it a priority to think through the obvious “what ifs” and then involve your attorneys to formulate an agreement. When one of the “what ifs” occur ,you will be very happy to fall back on its structure.