Feedback Form
Home Features Mastermind Forums About Advertise Blog Network Contact Be An Author

How to stop your business partner ripping you off

How to stop your business partner ripping you off

How Laura ended up in this mess
Laura and Sarah had met when they were working for their former employer. During that time they had come up with a unique idea for a business. They each had complimentary skills so it seemed an ideal partnership.
Laura and Sarah were advised against a legal partnership
Laura and Sarah took legal advice at the outset and were advised to set up a limited liability company rather than have a partnership arrangement. Each were to be Directors and equal shareholders.. The company was set up and started trading. At that stage everything looked rosy and both were looking forward to creating a sustainable business that would work for both of them.
Two years later Laura noticed that things weren’t right
After 2 years the company started to show some profit but Laura and Sarah were starting to have differing ideas of how to grow the business where once they were in complete unison. Laura started to notice a difference in Sarah as she appeared to become more detached from the business and her. She began to have suspicions.
Her suspicions were confirmed
Laura’s suspicions were confirmed when she received a letter from Sarah resigning as Director of the company. Legally this meant that Sarah no longer had a duty to act in the best interests of the company and paved the way for her to set up in competition. However, she remained a 50% shareholder.
Sarah wanted Laura to buy her out
Sarah wanted Laura to buy her shares in the company. Laura was angry. Not only had she lost her business partner and her IP, but now she was being asked to pay for the privilege. It seemed that Sarah was holding all the cards. Laura either had to buy Sarah out at an agreed value (which meant going through a valuation process), force a liquidation of the company or set up a new company again. None of those options were particularly attractive.
This all could have been avoided
Laura could have avoided all this hassle and cost if she had invested in a shareholders agreement when she and Sarah had first set the company up and started trading. A shareholders agreement is a private agreement between the shareholders of a company which sets out the basis upon which they will collaborate to make the business a success.
Had Laura and Sarah had a shareholders agreement they could have included clauses which prevented either one of them going off and setting up in competition to the company. This is especially important where two shareholders are bringing separate IP to the company and collaborating on the development of new IP, including building a customer base.
The agreement could also have determined what would happen if one party resigned as Director and how that person’s shares were to be treated. For example, could such shares be sold to a third party and what would be the agreed method of valuation? Unfortunately, Laura had none of these safeguards in place.
But we will never fall out!
When most people set up a business they never anticipate falling out. If you did you wouldn’t go into business in the first place. However, we all know that people do sometimes fall out. This includes instances when the shareholders are long term friends or even family members. It is in these particular instances when a shareholders agreement can be of most effect since such disputes can turn very acrimonious.
So even if your business partner is a long term friend or a family member make sure you have a shareholders agreement in place at the outset.





How to stop your business partner ripping you off - To learn more about this author, visit Michael Smyth's Website.

Like this article? Share it with your friends

Article Feedback
 How to stop your business partner ripping you off great advice
Commented on How to stop your business partner ripping you off.
 How to stop your business partner ripping you off Leave Your Feedback
article feedback

Article Feedback
Linda Richardson
Linda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website

John Alexander
John has taught keyword research and SEO skills to small groups of business owners and Webmasters from over 80 different countries world wide since 2002. John is also the Director of Search Engine Academy ; Co-director of Training at Search Engine Workshops offering live, SEO Workshops with his partner SEO educator Robin Nobles, author of the very first comprehensive online search engine marketing courses at SEO Training Online and the SEO Workshop Resource Center.
I look forward to hearing from you! - Visit John Alexander's Website

David Barr
David Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website

Anne Barr
Anne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website

Casey Gollan
Casey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan's Website

Kim Castle
With nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website

Jeff Foster
WebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas.  We specialize in internet consulting & internet marketing
- Visit Jeff Foster's Website

David Acheson
David Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns.  David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website


To learn more about the Evan Elite Author Program please contact us.

About The Author


Michael Smyth
(Visit Michael's Website) Six years old sounds a peculiar time to start to legal career, but that's the first memory I have of going to my Dad's law firm located in the heart of legal London. So, with law running in the family, the natural choice at University was a law degree. I also had a keen interest in Sports Law and obtained a Post Graduate Certificate in the subject from Kings College London. I came to New Zealand for a year, but like a lot of people I quite liked the place, and I'm still here practising law as a self employed barrister and running three businesses: Approachable Lawyer, Sportscounsel and The Sports Risk Management Group (the last two even allow me to combine my passion for law with my passion for sport). So in my 11 or so years of practice I have read numerous cases, helped many clients out of the mire and set up a number of businesses. That means not only am I a lawyer with an expertise in employment and sport, but I am also a businessman. This gives me a good insight into a number of problems my clients face. I also like to pride myself on my approachability - But don't take my word for it, visit my website http://www.approachablelawyer.com/p rofile.htm

Michael Smyth is a Gold author on EvanCarmichael.com
About The Author

View Author Blog
View Author Blog

View Author Video
View Author Video

Free Downloads


Michael Smyth's

Complete
List Of
Legal
Articles

Name
Email
If you enjoyed this article, get Michael Smyth's Complete List of Legal Articles For FREE!

More Michael Smyth
Where the Bible teaches us how to improve our cashflow
How to protect your IP being stolen by your employees
How to get your customers or clients to pay up
Three important checks every business owner should make before choosing their trading name
Why you shouldnt copy someone elses terms of business
Why running your business is no different to running your car
How directors can prevent themselves being liable for their companys debts
Cashflow tips How good is your fuel gauge
Why every business should have a strategy for growth and how to do it
The Secret of Business Success
Free Downloads


 
 
 


Evan Elite Authors
John Alexander  
John Power  
Staging Diva  
Evan Elite Authors

Become An Author
Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details.
Become An Author

Evan's Latest Video
Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media
Evan's Latest Video

Business Opportunities
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"

How to Start An Online Business

Click Here To Learn More
Business Opportunities



Evan's Newsletter
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
Name:
Email:
Evan`s Newsletter

Free Downloads
Biography Icon Biography
Mirror Marketing Icon Mirror Marketing
Networking Royally Icon Networking Royally
EMPLOYMENT PRACTICES LIABILITY Icon EMPLOYMENT PRACTICES LIABILITY
Create A Mission Statement Icon Create A Mission Statement
Free Downloads - Complete List

Entrepreneur Tools and Guides
Fortune Hunters - CBC Entrepreneur TV
Fortune Hunters
CBC Entrepreneur TV
 
Email The Reporters
Email The Reporters
Press Release Builder
 
Entrepreneur Tools and Guides

SEO For Africa
SEO For Africa
Carol Nakintu's Group Lugazi, Uganda,
Carol Nakintu's Group
Lugazi, Uganda
SEO For Africa

If I Were A Startup...
Dana Zita, > $2.5 Mil in revenues
Dana Zita
> $2.5 Mil in revenues
Travis Hartley, 426% Growth in 2 Years
Travis Hartley
426% Growth in 2 Years
If I Were A Startup... - Complete List

Famous Entrepreneurs
George Foreman, George Foreman Grill
George Foreman
George Foreman Grill
Lillian Vernon, Lillian Vernon
Lillian Vernon
Lillian Vernon
Famous Entrepreneurs - Complete List

Entrepreneur Advice
Seth Godin, Ideavirus Author
Seth Godin
Ideavirus Author
Guy Kawasaki, The Art of the Start
Guy Kawasaki
The Art of the Start
Entrepreneur Advice - Complete List

Popular Articles
(Premium Authors)

     Clarity Through Panic
By Jay Kubassek
     Putting Savvy Before Necessity by Jay Kubassek
By Jay Kubassek
     Get Real. Get Rich.
By Jay Kubassek

Have A Suggestion?
Toronto Salsa Classes / Toronto Salsa Lessons Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
Have A Suggestion?

More Evan Carmichael
More Information