Starting a company with your friend may seem like a fun and exciting way to make money and grow in your career. However, there is no guarantee that your friend will make a great business partner or that you will be able to separate what happens at work from what happens outside of the office. Therefore, it’s important to have a written agreement in place so that everyone knows what is expected of them.
A business is a huge responsibility
Running a company is about more than just making money and having fun. For your workers, vendors and others affiliated with the business, your ability to make a profit directly impacts their lives. Furthermore, your customers need to know that they can reach out to you if there are problems in a timely manner. They also need to know that they will be treated with respect during any interactions that they have with your business. Having a contract in place can help to ensure that each partner knows their role and what to do in most situations.
You can’t predict the future
A written contract may also be helpful in situations that you didn’t expect to arise. For instance, if your partner gets a divorce, a buy/sell agreement can prevent the business from falling into an outside party’s hands. A written contract may also provide the framework for what happens if the company is sold or is otherwise acquired by another business.
Verbal contracts are hard to enforce
Most business law students are taught early on that a verbal contract is harder to enforce than a written one. In some cases, a verbal contract cannot be enforced at all. This is because it’s easy for one person to invent or forget key terms of the supposed arrangement.
Regardless of how well you know your business partner, it’s imperative to have a written contract whenever you start a company. Doing so may prevent a number of issues from arising or make it easier to solve any issues that do arise in an amicable manner.