The 4 D's of Business Agreements

One of the more common forms of business structure is the partnership. Whether it is a simple partnership with 2 or more persons working together, or one of a Limited Company with share strucuture and 2 or more shareholders, when there is more than one party in business it is then some type of "partnership" structure.

Partnerships can and do work very well. Unique talents and abilities are contributed and often time the contribution dynamics create more than just simple addition. Two plus two can actually give the results of eight. For the cynics and doubters of the value of partnerships I will repeat a statement an old long time business associate years go said to me, "Get on any ship in the world John, but don't get on a partnership". This was a man involved in three current working partnerships and doing well, but there are challenges. He had also been involved in some unsuccesful ones. It takes some experience to understand what makes the dynamics of a partnership work.

The challenges of a partnership can really be dealt with by properly addressing what I refer to as the 3 big "D's". What happens to a partnership when faced with Death, Disability, Disagreement and Divorce of one or more of the partners. Any of these items cause financial and work performance issues, and most can be quite serious.

The short story is that these issues should be addressed in a properly written partnership agreement, or stock redemtion agreement. If and when any of these four items come up, previously agreed to remedies, such as time frames and financial arrangements are defined in the agreements. Life insurance and disability insurance should be utilised as a full or partial funding solution for 2 of the "D's". Creative "previously agreed to terms" are best dealt with when a partnership is relatively new and everyone has common goals they want to achieve. Even though a "D" has occurred, and disruption will obviously take place, the partnership must continue for the good of the partnership and the least disruption in business.

Remember, if a partnership agreement is not in place and one of the 4 D's occurs, the remaining partners will probably be adding the spouses to the discussions to settle what needs to be done. If no previously agreed to terms have been established, this type of situationt will add more stress on everyone that remains to negotiate a settlement and yet continue running the business.

We recommend that you contact your lawyer, a qualified insurance broker or the writer of this article for further information.

Johnny Vee