Many cases are done by a handshake. Handshake chords work well until they don`t. Something`s wrong with business. Relationships are furious. Conditions are changing. And when they do, and you have to involve lawyers, one of the first questions you`re asked is, “Did you get this in writing?” If you have been in this situation before and you have not reached a written agreement, you know that the protection of interests and the defence of rights are much more difficult if there is no written document explaining the terms of the agreement of the parties. Since agreements are the cornerstone of most trade agreements, I am surprised by the number of entrepreneurs who continue to ignore the importance of writing it – it is true, a written contract. No matter how well-intentioned both parties are, the service on a handshake is far too risky for your business. In the absence of a written agreement, business owners will abide by standard state rules. In California, an LLC is the Revised Uniforme Limited Liability Company Act, the General Corporation Law for a Corporation and the Uniform Partnership Act for a general partnership. While the statutes of the state do in a squire, most owners need and want more control.
A written agreement allows owners to change the rules when situations dictate that it would be in their best interest. You may face the other party who has “memory loss” or is asked to meet certain conditions that have never been accepted. The first thing a lawyer will ask you when you explain your problem is, “Did you get it in writing?” Learn more about all the conditions that a partnership agreement should include in the “partnership terms.” Good communication and relationships with your customers and suppliers help avoid litigation. Make sure they know how to give feedback if something goes wrong and make sure you take care of it immediately. The benefits of a detailed, clear and well-written contract are immense. Making written agreements with parties with whom you deal, including customers, suppliers, contractors, partners, shareholders, LLC partners and investors, should be a basic business practice. If something happens to a partner, if there is a dispute between partners or if there is a change in the partnership, everyone needs to know “what happens if”. A partnership agreement is the best way to ensure that the commercial – and personal – part of the relationship can survive.
Oral agreements or “handshake agreements” can be a significant risk to your business. Without the written registration of the agreement, you risk problematic interpretations of the terms of sale. And if litigation is necessary, you risk high legal fees. On the other hand, all this can be avoided by deciding to formalize your trade agreements in writing. A written partnership agreement should contain provisions for the protection of minority partners. Such a clause, the “tag along” provision, protects minority owners in the event of a third-party purchase. If a majority shareholder sells its shares to third parties, the minority shareholder has the right to be part of the transaction and to sell its shares on similar terms. The advantage for the minority owner is that he can avoid being in business with an unwanted new co-owner. This provision also ensures that all partners receive similar takeover offers and protects minority owners from the adoption of much less attractive offers.
Chances are you`ve heard that phrase before you`ve entered into a commercial contract. Whatever the circumstances of a business relationship, and even if you trust the party involved, a written contract is a much better protection of your company`s interests than a handshake.