Going into business with someone is one of the most exciting things that you can do. The world is your oyster – you have a great idea, have spotted the gap in the market, your partner is the perfect complement to you and the sky is the limit. Things are going to go absolutely brilliantly and you and your business partner have been friends for ages – what could possibly go wrong?
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Unfortunately, life and business are not so simple. The trials and tribulations of business life cause frictions, even in the most secure of business relationships. Worries about sales, cash-flow and just paying the bills can have a corrosive effect on a work relationship. Once this sours, it can mean that every problem or irritant becomes magnified out of proportion, which can eventually destroy both the relationship and the business.
However, no one thinks it will happen to them. Just as ever marriage starts out with chirping birds and not a thought of divorce, so every business relationship starts with an expectation that the path will be smooth and that the relationship can survive anything.
A shareholders’ agreement can actually help with that. By setting out the parties’ expectations upfront and dealing with things like what will happen if they wish to split apart, a shareholders’ agreement can take some of the heat out of a disagreement and prevent the relationship suffering a permanent breach. This means that the parties can still work together to make the business a success, despite any personal disagreements.