When embarking on an entrepreneurial venture with anyone, including people you trust (i.e. family and friends), be assured that there are always risks involved. To protect your interests for the future, it’s advisable to make your business relationship official by way of a commercial contract. Commercial contracts provide a practical framework which enables you to focus on your business needs and consider the associated risks. Once in place, they will provide your business with a greater level of protection from future potential issues. You need to be savvy in business and if you’re inexperienced about contracts, it makes good sense to take advice from those with skills and knowledge in this area, particularly in the legal field.
Consider this – if you agree to go into business with your father, will you both view it as a continuation of your father/son comfort zone relationship, or will you view it as a new scenario? Many do not separate the friendship or family relationship and the new arrangement – the business relationship. You need to appreciate the importance of making that new business relationship official by way of a commercial contract, in order to avoid any pitfalls.
The 5 essential aspects of a business relationship to consider when drafting a commercial contract are:
- Who’s in charge of which area of the business?
- What happens to the partnership if one of you fails to fulfil their obligations?
- Who’s the CEO? Who’s the COO?
- Who takes care of the legal/finance/development of the business?
- What happens to the assets if you decide to amicably part company?
Have you got a system in place for the smooth running of your business without affecting your personal relationship? Be prepared. Unforseen occurrences befall us all. You need to think ahead and have in place a system by which you can anticipate difficult situations and solutions in order to protect the partnership and the business, as well as the personal relationship. Commercial contracts work like reminders of what’s been agreed. A lot happens when you start a partnership so anticipate forgetfulness from both parties. Yes, people forget what they agree on, which is only natural because running a business is a very complex affair.
You need a commercial contract included in the process of setting up a partnership, which is indispensable for the smooth running of a business. Understand that whilst business contracts can be either verbal or written oaths, the essential aspects of a contract need to be stipulated in writing, in a document skilfully structured and carefully planned around those 5 essential aspects of a business relationship, regardless of whether you’re going into partnership with your best friend or your father.
For more information about setting up a Commercial Contract for your business protection, you can contact our legal associate David Gordon at DG Law for further advice on 020 7113 4003 or email: firstname.lastname@example.org