At Guerra & Partners, we frequently counsel clients about disputes they’re having with their business partners. While we are litigators, we find it is often more productive to discuss common-sense ways to help our clients resolve problems and avoid courtroom conflict. If those approaches don’t work, a trial or final hearing sometimes provides the only solution. Years of counseling have yielded some hard-won wisdom that we’ve summarized, tongue-in-cheek, in the following list of ways to make your business partnership fail. Doing any of them may create headaches, sleepless nights, and legal expense that would be better avoided:
– Don’t put your agreement in writing. Tell yourself, “I trust my business partner. We don’t need to put anything in writing!” Make everything oral so you can “keep your options open.”
– If you do put something in writing, don’t discuss it with your own lawyer before you sign it. Corollary: consider the draft a mere “formality” or “legalese” that will never matter later.
– Assume that none of your partners will ever want to cash out or “go in a different direction.”
– Assume that none of your partners will ever become a competitor.
– Assume that you and your partners will live forever. Corollary: assume that your heirs and your partners’ heirs will know exactly what to do when someone dies.
– Assume that your business will never fail, close, be purchased, or be involved in a dispute.
– If you are a minority shareholder, don’t ask for copies of consents, minutes, or the shareholder agreement. If you get any of these documents, don’t read them. Rely solely on the oral representations of the majority interest holders.
– If you own the controlling interest, run the business however you wish. Don’t consult your minority owners. Never review the bylaws or operating agreement before making significant business decisions.
– If you are a director, don’t learn your duties. If you learn your duties, don’t do them.
None of the preceding is legal advice. It is satire. But these “tips” come from the actual experiences of our clients and opposing parties. Before making a decision that has legal implications, talk to a qualified lawyer who understands your exact situation. Protect your investment, and your mental well-being. Hire good counsel at the start instead of at the end.