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The process of adding a new business partner

On Behalf of | May 11, 2023 | Civil Litigation |

Imagine a partnership started between two professionals in the same field who have since realized that their connections or experience are limited and impact their company. Or perhaps a business is on the threshold of success, but there will be six months where its profit margin is razor-thin unless there is an influx of cash and the current partners cannot invest anymore.

For whatever reason, an existing business partnership may want to expand to include a new partner. When that transition occurs, the process will typically necessitate a very lengthy conversation involving not only the new partner but everyone else invested in the company’s ownership.

Partnership agreements will require modification

Taking on a new business partner will inevitably shift the responsibilities and dynamics already in play at the organization. Therefore, adding a new partner will require all existing partners to revisit their agreement with one another and establish terms that reflect the new partner’s participation in the company. Everyone involved should discuss the updated partnership agreement and the company’s future.

This can be an ideal time to revisit existing agreements and add terms that people may have overlooked initially, including conflict resolution and confidentiality clauses. Partners can also take this time to clarify certain factors that have already strained their relationship, such as the number of hours each partner should work each week. Ideally, business associates can set themselves up for success moving forward by discussing everything from the breakdown of daily operations to what all partners expect from one another.

Good business relationships require solid contracts

Taking a healthy and functional partnership arrangement for granted is easy when things work well. Any major changes, including the addition of a new partner, will shake up the existing dynamics and could lead to conflict.

The more carefully people protect themselves and clarify their obligations and expectations with one another, the less likely they will have business disputes that affect the successful operation of their company. Seeking legal guidance to renegotiate partnership agreements can be an important step when a company’s management and ownership interests shift.