Think of a Joint Venture as a marriage that’s set to last only for a predetermined amount of time. As with a marriage fated to end in divorce, a prenuptial agreement is key to keeping the peace similar to a partnership agreement in a Joint Venture.
What does this mean? Read on…
Imagine that you decide to host an intensive weeklong program for aspiring entrepreneurs once a month for three months. When you mention the idea to a friend, they think it’s brilliant—so brilliant, in fact, that they ask you if you wouldn’t mind them partnering up with you to do it. You think about your friend’s knowledge and expertise in the area and decide that they would make your brilliant idea even more brilliant! So you agree that, yes, you could use a business partner, and you prepare to embark on this Joint Venture together.
The Honeymoon Phase
While you do think momentarily about drawing up a contract and a business plan for both of you to follow, you either decide against it or just casually forget about it. After all, you’ve been friends with this person for years, and you trust that all will go smoothly on this little business venture of yours.
And all does go smoothly—for the first couple of months anyway.
A Rough Patch
But after that initial planning phase, you notice that your friend and partner’s dedication to the project is beginning to wane. Ideas and contributions are coming less frequently, and when they do have something to share, it’s a half-hearted attempt made for the sole purpose of appeasing you. As the event draws nearer, your friend stops responding to your attempts at communication and you are left to handle the entire event on your own. Though you scramble to fill all the gaps left by your partner, the event runs smoothly.
As you anticipated, people arrive for the first program to hear what you have to say on entrepreneurship. During the second and third programs, even more people attend. As the last weeklong program comes to an end you deem the program a success and look forward to next year.
You take out 15% of the profits (you think this is a reasonable amount, considering the initial efforts) and send your “partner” a check. You assume all is fair and are even thankful for having learned one valuable lesson: Never do business with a friend again.
A couple of weeks later, you receive a letter from an attorney stating that if you don’t pay your ex-partner the remaining 35% owed for their efforts, legal actions will be taken.
Remaining 35%?! But you’re the one who did all of the work!
You know you’re in the right, so you feel comfortable contacting an attorney to defend you…
The whole process becomes long and drawn out. There’s a lot of yelling and hurtful words thrown around and at the end of it all—whether you won or not—you lost a friend.
Money makes people crazy and whether you think you know a person or not, it’s imperative to have a written contract in place before embarking on any business venture, with anyone.
As mentioned previously, a Joint Venture partnership is like a marriage; realistically any business partnership is like a marriage. As in a marriage, where each party contributes a share of assets and a prenuptial agreement is formed, in the case of a Joint Venture, a Joint Venture agreement is wise.
Contracts for business partnerships are not as straightforward as you may think. There is a lot of to consider. Because details are critical, it’s best to have a lawyer create the needed documents for you.
That’s where we come in.
We can facilitate a joint venture, help you consider the issues with your partner, and draft an agreement you and your future business partner both want, so that even if you lose a business partner in the end, you’ll come out with a friend.
If you’re thinking of embarking on a Joint Venture in the near future, contact us at https://jhrlegal.com/find-us/ to discuss the details first. It will be in the best interest of you, your future partner, your business and your friendship.