A Texas business can often benefit by expanding its leadership by bringing on a new partner. This can be useful in myriad ways. New partners can bring capital, expertise, a customer base and fresh ideas.
However, there are risks with changing a business dynamic.
It is essential to be aware of the law regarding partner relationships. It is also wise to have professional help to ensure everyone is sufficiently protected.
Key points the business and the prospective partner should know
When bringing on a partner, the existing partners must all consent to the new person. The partners need to know about credits and charges. For a partnership, all will be responsible for and credited for an amount that is equal to what they contribute to the partnership in cash and value; they will also be eligible for their share of the profits. They must share in the credits and losses.
When managing the business, the partners will all have equal rights. This can be crucial because management style and decision-making can differ when adding a partner. Disputes can arise over how things are done.
The business must plan payment schedules. If one partner makes a payment or advances cash or credit further than what they initially agreed to, they have the right to receive repayment and interest. This is possible when there is an infusion of capital to help bolster or advance the business.
Partner conduct is key. As part of the partnership, the partners are obligated to show a duty of loyalty and a duty of care. The partners need to think about the partners’ interests and act in the business’s best interests. The business decisions need to be based on what is good for the company.
When considering a partnership, knowing the requirements and rules is crucial
For these complex matters, having experienced advice from those who have handled all forms of business transactions can make a major difference in a positive outcome. Small and mid-sized businesses can benefit from having a partner, but it is imperative to be fully prepared to bring one aboard with the right kind of guidance.