Failure to Enter into Buy-Sell Agreement with a Divorce Provision
Even for friends or relatives who start a company together, relationships between owners can go sour. In order to protect the interests all parties involved, small businesses with multiple owners should enter into a "buy-sell" agreement that specifies how they will accomplish a "business divorce" if the needs of the owners change.
Failure to Agree on Responsibilities and Majority Ownership
Equal ownership often leads to disputes since there is no one person with ultimate "control." Whenever possible, it is best to have one person who is the majority owner with the ability to make decisions, and a clear understanding of everyone's role.
Failure to Document Important Agreements in Writing
Disputes over the interpretation of oral agreements are the basis of many lawsuits. When an agreement is not in writing, there may be arguments both as to what was agreed and whether there ever was an agreement.
Failure to Follow Legal Requirements to Prevent Personal Liability
Many business structures protect owners from having personal liability from the obligations of their business. However, protection can be lost if...