Business Protection

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When setting out in business there are a million and one things to consider but one of the things that never fails to surprise us is the lack of consideration given to the decision making process when starting a business with someone else.  Whether it be a partnership or Directors/Shareholders in a Limited company there are many more things to take into account.

On a far too frequent basis we see starry eyed people wrapped up in the ‘interesting’ and ‘sexy’ bits of starting a new venture without paying any attention to what would happen in the event that people fall out, the business doesn’t work out, someone wants to go off in a different direction or one of the Director/Shareholders decides to start a family.

These are all often scenarios but ones that are rarely planned for.  When going into business with someone else you need to tread carefully because whilst you may be best of friends or there is synergy between what you can bring to the table this is not a recipe for success – often quite the opposite.

It sounds doom and gloom but we deal with the consequences of people falling out or things not going to plan on a regular basis.  When you are new to business you have no idea what this means for you or what rights you have which is why it is so important to deal with this at the beginning.  You wouldn’t sign any contract without knowing how/if you can get out of it and what the repercussions are.  So why do it with what could arguably be your biggest asset?

Believe me when I say friends are friends when everyone is pulling in the same direction, things are going well and everyone feels that they are doing and equal amount of work for an equal return.  This is highly unlikely in the real world and you need to be open and honest enough with each other about what will happen in the event that this occurs.  A business relationship is just like a personal relationship and should be treated as such with respect and trust.

Many people have already fallen where you are now walking so as you can imagine there are many safeguards already in place.  Below we have compiled a list of the things you will want to consider when thinking about business protection.  Remember when looking into this options that your business asset may end up being the biggest asset you and your family own so it is imperative for their future safeguarding that you do not ‘come back to this when we are up and running and things are a bit easier’ as they never will be.  It is much harder to put things in place once you are running a successful business and often much more costly – thats if you make it that far.

In most small businesses the Directors and Shareholders are often the same people but it is very important for you to remember that these two roles are different and have different rights and responsibilities attached to them.  Just because you want someone out of the business does not necessarily mean you can make it happen.  If they are not performing their role as a Director what can you do about it?

Finding the perfect partner

The easiest way to deal with this is to ask yourself a series of questions.  If you answer No to any of these questions then perhaps you have a decision to make.

  1. Do you like them personally
  2. Do you have similar backgrounds and beliefs
  3. Are your personal and business goals aligned
  4. Is your exit strategy aligned
  5. Are your skills complimentary
  6. Could you buy in those skills from elsewhere and have the cash available
  7. Are you happy for them to be working on other projects at the same time as yours
  8. Do they have domain expertise you do not possess
  9. Do you genuinely believe they are bringing something to the table that you neither have or can buy in

DISCLAIMER: Nothing written within the Business Protection section of our Knowledgebase is deemed to be provision of advice and we highly recommend seeking the opinion of a solicitor or financial advisor.

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