How to Write a Dispute-Proof Operating Agreement
Putting your agreements in writing is an essential step toward protecting your rights and interests in the event of a business dispute. It is the nature of business that partners promise each other all sorts of things in the heat of a brainstorm or negotiations, but spoken promises are rarely legally enforceable. Some successful entrepreneurs have found success by making bold claims in the moment to catch the attention of a prospective client or collaborator; only sometimes does the other party take them to task about fulfilling their promises, and only in some of those cases does the big-talking entrepreneur actually fulfill them. The flipside of this phenomenon is that only a fraction of the business projects that get promised and planned ever come to fruition. To prevent your business partnership from ending in a bitter breakup, you should consult an Alabama business law attorney to help you and your business partners draft your operating agreement.
Be as Specific as Possible with Your Partnership Agreement
If you and your business partner end up in court because of a dispute, the first thing the judge will ask is to see a copy of your operating agreement. Just because you have an operating agreement, it does not mean that nothing will go wrong or that the solution to any problem is obvious. For some business structures, you have to have some sort of written agreement before you can legally do business, but that does not always mean that your agreement is carefully crafted enough to help you resolve conflicts successfully. A partnership agreement should include the following information:
- The position title and duties of each partner
- Each partner’s percentage of ownership of the company
- Where the business will get its startup capital and other capital contributions
- How each partner will be paid, including distributions
- The procedures the business will follow for decision making (such as voting)
- How and under what circumstances the business can be dissolved
- Which courts have jurisdiction to rule on disputes arising from the agreement (this is especially important if the partners live in different counties, or if some partners live in Alabama but others live out of state)
The agreement should ideally also include procedures for dispute resolution, as well as other worst-case scenarios, like what will happen if one partner becomes incapacitated. You and your new partner might think that you have planned for every possible worst-case scenario, but if a business law attorney reviews a draft of your agreement, they can see where the loopholes are that could lead to messy disputes in court. Even if your partnership agreement is long and detailed, and even if you based it closely on a sample contract, a business law attorney can help you revise it to remove ambiguity and loopholes.
Contact Us Today for Help
Get your business started on the right foot by consulting a business law attorney about the partnership agreement for your new business project. Contact the Alabama business & corporate litigation attorneys at Cloud Willis & Ellis for a consultation.
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