LLC Partnership

Discussion in 'Starting a Business' started by pawa_k2001, Jul 14, 2012.

  1. pawa_k2001

    pawa_k2001
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    My brother and I are in a LLC partnership(50/50) in our retail business. We are not having any issues right now but his life style is changing. We are losing some of our communication, I am trying to put some rules and exit strategy on paper before any major issues come up. Does this have to be done through a lawyer or can we put this on paper and have it notarized?

    Some of this things I want to put on paper:
    If one side wants to leave, that side has 3 months to sell off as much inventory as them want and they get 50% of the profit. During that 3 month period, any inventory I add will be from my own pocket.

    The side that is leaving can not take any assets of the company. Only 50% of all cash.

    If one side gets a DUI, his share and income goes from 50% to 40%.

    If one side refuses to work, they get 0% income that month. 100% goes to the working party.

    Is there anything else I need to add? Any pointers and suggestions are welcome. My brother and I have been in this business for almost 3 years.
     
  2. falconator

    falconator
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    I'm not sure but I think as long as both parties have agreed and it is in writing then it will hold up in court.
     
  3. Fergal

    Fergal
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    Similar to falconator, I'd suggest that what you should do is have a sit down meeting with your brother and try to come to an agreement on a document that would formalise your business relationship. Once you have this document in a form that is acceptable to both of you, contact your solicitor and get a professional legal opinion on it.

    You might also find this thread helpful What should be in a business partnership agreement!
     
  4. ArcSine

    ArcSine
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    Pawa_k2001, what you're doing is very smart; hopefully the partnership incurs no difficulties, but if it ever does, it's likely that the provisions in your partnership agreement will prove valuable.

    Couple of suggestions: For one, try to review several different partnership agreements, along with resources such as the link Fergal provided. The thing with p-ship deals is that there are 1,001 things which potentially could go awry, and no one agreement has managed to anticipate 'em all. By reviewing several actual agreements and "how to" guides, you'll be made aware of many more of the provisions and "what ifs" you should have in your agreement, far beyond what you could've thought of yourself.

    Also, try to tighten up the terms, the language, and the definitions as much as possible. Provisions containing ambiguities or loosely-defined terms are the Achilles' heel of agreements when they're called upon to settle disputes. For example, the provision addressing one of the partners "refusing to work": What constitutes a "refusal"? Is it working less than 100 hours, 80 hours, X hours, ....? In a calendar month; in any consecutive 4-calendar-week period, in any consecutive 30-day period? Are temporary physical disabilities exempt? What constitutes a qualifying exempt disability: A physician's decision? What if one partner "refuses to work" during some month in which a loss is incurred; does the other partner bear the full brunt of the loss from his capital account? (If so, you've inadvertently created a loophole for a partner to duck out of sharing in a loss, simply by "refusing to work" for a month if he anticipates the books will show a loss that month.)

    You get the drift. Critique every provision for any possibility that someone might be able to interpret the provision any differently than what you have in mind, then tighten the definitions and the language to wring out any such ambiguities.

    As a final note, I second Fergal's advice about having an attorney vet your final product. The things I've mentioned (an awareness of the various provisions that should be incorporated into the agreement; knowing how to draft language that's as close to dispute-proof as possible) are the attorney's stock-in-trade. A little coin spent now, renting the lawyer's expertise, might save you a much larger sum later.

    The fact that you're pursuing this drafting of a better agreement is, in itself, commendable and wise. Best of luck with it, and with the business itself. If you and your brother work well together, chances are good you'll never have to use the agreement to referee a major dispute. But like fire insurance, simply having the "insurance policy" in place is the smart thing to do.
     
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  5. ServerGurus.com

    ServerGurus.com
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    Simply having something notarized between the two of you should be sufficient, though it is never a bad idea to have a business lawyer review things.
     
  6. Richard Thompson

    Richard Thompson
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    No matter what the papers is called, read it carefully and ask questions to be sure you understand and agree with the terms before you sign mutually. If an agreement involves complicated technical language or an expensive item, you may want to have your business litigation attorney review the provisions before you sign.

    Have a great day.
     
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  7. GeekGhost

    GeekGhost
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    For an LLC, you can simply use an operations agreement for any particulars that you and your partner(s) decide on. This doesn't need to be notarized. Simply having original copies signed by all parties will hold up in court. You can add amendments to the operations agreement as more money is invested or changes are made to ownership, rules, etc.

    I am not an attorney and my post is simply based on my personal experience having dealt with LLCs in the State of Florida.
     

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