Starting a business on your own is tough. If you’re planning on working as a sole trader and not expanding your business it can be a good option, but if you’re looking to build a start-up that will hopefully grow rapidly both from a revenue and personnel perspective, working with partners makes sense. A number of studies on start-ups have shown that businesses with two or three co-founders are the most likely to succeed. This isn’t surprising given the additional capabilities working with partners will give your business!

If you do decide on working with partners, there are a number of issues to keep in mind; we set out a number of these in this article.

1.  Decide on a Business Structure

You can either decide to go into business as a partnership or a company. You can work out the best structure for your business by reading our article on “Company Structures”. Once you’ve decided on a structure you will need to document the agreement between the partners in a legal document.

2.  Legal Agreements for working with partners

If you’re setting up a partnership, you will need to draft a partnership agreement. If you’re setting up a company structure with your partner, you will need a shareholders agreement. In either of these agreements you will need to include terms relating to (i) how profits are to be shared, (ii) how much start-up capital each party will contribute, (iii) ownership percentages, (iv) buy-out options and (v) separation of work duties.

A good partnership agreement or shareholders agreement, such as the LegalVision documents, will contain many more clauses setting out the way in which the relationship between the parties is to be governed. If your business is relatively simple, you don’t need a huge document to set out the relationship between the parties, but it does pay to be as clear as possible – this can save you time and money in the event of a subsequent dispute with your partner/s.

3.  Communicate

Communication is the key to working with partners (or a personal partnership!). It’s a very good idea to have a regular weekly, fortnightly or monthly meeting to discuss the major issues facing your business. If you’ve formed a company you can tie this in with your board meetings, although this isn’t strictly necessary. Furthermore, you should make sure you communicate on a personal level with your partner on a daily basis, whether over email, phone or face to face. A large number of legal disputes are caused by poor communication. Don’t let this happened to you!

4.  Exit Strategy

It’s important you and your partners are on the same page with regards to the businesses exit strategy. If you’re goal is to build to sell, and your partner wants to set up a lifestyle business, you’re going to end up in dispute. Make sure you both have the same goal from the start, and build tag-along and drag-along clauses into your Shareholders Agreement (these are included in the LegalVision Shareholders Agreement).

Conclusion

Working with partners can be difficult. To form a successful business partnership you need to be on the same page from the start and to document your agreement with a well drafted Shareholders Agreement or Partnership Agreement. LegalVision can help you with this! Contact our office today to speak with an experienced business solicitor on 1300 544 755.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Lachlan McKnight
Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy