Creating and growing a lucrative business with a spouse, parent, sibling or other close family member is a dream come true for many Texans. It is also a common theme in the nation’s business landscape, as Cornell University says over half of the country’s GDP comes from family businesses.
Partnering with a family member to forge a successful venture offers many unique advantages. But the journey can be filled with frustration and obstacles to success if expectations, duties and contributions are not outlined at the beginning.
Are equal partnerships a good idea?
Many families believe an egalitarian approach to ownership is only fair. An owner’s succession plan may give their children equal shares. While siblings, spouses or otherwise related co-owners may agree on all or most significant issues at first, disagreements are bound to happen later. Equal partners may have radically different views on many issues, including:
- Buyout opportunities
- Sudden downturns caused by a partner’s mistake
- Differing philosophies over risk vs. reward
- Hard feelings over capital and time contributions
- Future succession considerations
Disputes over these and other issues often escalate, possibly placing the business in jeopardy if no dispute resolution system exists.
Put everything in writing
All successful Texas partnerships, family or otherwise, have something in common. They draft strong partnership accords outlining all aspects of the relationship. Effective agreements include these and other details:
- Each individual’s role and responsibilities
- Percentage of ownership
- The business’s structure
- Each partner’s financial contribution
- How decisions are made
- What happens if a family member leaves the business
- How disputes are handled
Having these issues and others in writing can prevent or reduce conflicts, as each partner knows what to expect. Experienced business law attorneys understand how to identify areas for potential disputes and craft complicated partnership agreements.