You might want to sue your business partner one day.  It happens, often actually.  And you are not immune from the circumstances that lead to disputes among co-owners of a business.  Every small business needs to address the possibility of future shareholder or owner disputes. These concepts apply to every business structure, including partnerships, limited liability companies and corporations.  These concepts also apply to companies large and small.  However, the best time to address these issues is when a new company first forms and starts operating.

Shareholder disputes are time-consuming, expensive and counter-productive. Shareholders disputes are easy to avoid, if you agree on basic principles before shareholders come together as business partners. The basic principles include-

1. Who does what jobs.
2. Who gets paid what and when. (I include a provision to cover taxes.)
3. What happens if someone stops working or completing their job duties.
4. What happens if there is a buy-sell “triggering event” such as death, divorce, dissolution of the entity, disability, etc.
5. How elections are held to select company leaders.

The key to solving shareholder disputes is to AVOID them in the first place through buy-sell agreements, operating agreement and similar documents. Do NOT form your business partnership without addressing these issues IN WRITING AT THE START.

In the case of buy-sell agreements, you might want to consider life or disability insurance as a way to fund the buy-sell provisions. So, if a key owner is injured and the buy-sell provisions are triggered, the insurance is there to fund the buyer’s obligations. The same can be true for life insurance to cover the loss of a key owner.

One final thought. . . pick your partners well.  I have myself had to endure difficult and unreasonable business partners.  So, trust me when I urge you to be cautious in selecting your partners.  Assume each partner will be unreasonable at some point.  And remember that all partnerships will end one day.

Get it in writing at the start!

Matthew Griffith is an Indianapolis attorney, business coach and founder of the GRIFFITH LAW GROUP LLC -  www.IndyBizLaw.com.  His is a principle, director and co-founder of the business coaching firm, Xpedishon Coaching, LLC – www.Xpedishon.com.  He also co-counsels client matters with attorneys at Vivo Law Offices, LLC through its virtual law service-  www.IndianaVirtualLaw.com.