Business Partnership Advisor
Together, we can fix your business and partnership problems
Chris Reich, Business Mediator
How to Draft Resolutions to Strengthen Your Partnership
My partner and I have frequent disagreements over spending the petty cash. To fix that, I wrote up a rule and asked her to sign it. She refused. We need rules but that didn’t work. I don’t feel like we need mediation for something this minor but I don’t know what to do.
Good Fences Make Good Neighbors
There’s an old expression that goes back to the early days of this country that says, “good fences make good neighbors.” That means setting clear boundaries is a way to avoid a lot of disputes. I am a big believer in applying that axiom to business partnerships. Many little tensions leading up to a big blowout are usually rooted in a lot of minor incidents that could have been avoided. Defining “rules” will usually eliminate the behaviors that irritate partners. I recommend that partners talk through a specific issue and then draft an agreement (called a resolution) that sets a policy. You can keep this in a binder to serve as amendments (or foundation) to your Partnership Agreement. In this post I’ll explain how to talk about things that bug you with your partner and how to draft a binding resolution to fix the problems. Let’s go!
If Something Needs to Be Fixed, Don’t Let it Go
Keep in mind that I’m talking about real business matters and not personal quirks. If your partner likes green ties and you hate green, get over it. If, as the question above says, there are problems with managing the petty cash, deal with it. Letting those things go often leads to arguments. The first step is sort out the feelings from the business reality. Ask yourself if you are being nasty and controlling or if this truly matters to the business. If it matters, let’s go to the next step.
Set a Time to Talk with Your Partner(s)
You’ll want to address issues like this in a somewhat formal meeting. Set a time to talk when you both (or all) have time without distractions. Meet privately. This is not something to share with your receptionist or sales team. It’s a partnership matter for partners only.
Don’t write a rule and email it to your partner or shove something at them to sign. That’s not respectful to them. Do not prepare a vwritten document. That will make your partner leery of future requests to talk about policies. You can think about how you want to present your thoughts, but don’t draft anything until you meet.
How to Conduct the Meeting
The first time you have a meeting like this, it might be a little awkward. Future meetings will be much easier if you handle the first one correctly. You’ll want to say something like, “I’d like us to talk about making a policy on something. Let’s talk and you can tell me if you think it’s a good idea.” Stay low key. Don’t say something stupid like, “things need to change and I want some rules.”
Introduce your topic clearly and without accusation. “We are having a hard time managing the petty cash. For example, when the delivery guy brought the food for the client meeting yesterday, the petty cash was empty and I barely had enough to cover it. It was a little embarrassing.” See? That states the problem and why it matters to me. I didn’t say, “what did you do with the money?” There is little need to hammer the point home.
Next, offer a solution. “I propose we make a resolution saying that whomever draws the petty cash down to $20 or less, needs to notify the other partner so the cash can be replenished or at least we both know it’s running low.” If your partner agrees, draft it in the form of a resolution. Be sure to ask you partner for input. Draft it together. Then sign it. It’s important that you sign it. Then put it in your partnership agreement binder.
Read to the end! There’s a link to download a sample resolution at the end of this article.
When you want to solve partnership issues in a way that keeps them from coming back, draft a Resolution.
Chris Reich, Business Mediation
How to Draft a Binding Resolution
In order to make the resolutions ‘real’, in other words, binding and enforceable, we want to put them in writing. Written resolutions become contracts of sorts and that means if there is a pattern of ignoring these agreements partners may be able to take action. In my experience, once people sign agreements, they tend to honor them. Verbal agreements are rarely followed.
The first time you do this, it might seem a little strange but that will after you’ve done the first Resolution. You are protecting your business and your interest so don’t be shy about adopting a process of recording resolutions.
The format is simple. In the header, put the name of the business, the names of the partners attending the discussion, the subject, and the date. Simple.
Then state a very basic summary of the issue. If there is significant discussion, you might want to say something about that. For example, when it takes hours to agree on the wording of the resolution itself, you make say “all partners engaged in active discussion for 4 hours at the meeting of 6-22-20. I like to add that as it shows that there was ample time to make a decision. If someone feels forced to agree and they say so, you can add that to the summary. Partner Smith agreed to this resolution though he expressed his reluctance to do so.” It’s fine to make that note but only if it seems important.
Then state what is agreed. Put it in simple, understandable terms. Don’t get hung up on too much legaleaze.
It’s that easy. This works and will make your partnership stronger.
If You Want Help with a Meeting
If you worry about a discussion getting tense, I can help. I conduct ‘moderated’ meetings for business partners that keep the emotions out of the mix. I’ll guide the discussion and help you formulate your resolution. It’s inexpensive and educational. No retainers. I charge a flat fee in most cases. Large companies with many complex issues to resolve may be a bit more but most are less than $200. Isn’t that good value to resolve an issue and learn a solid business practice?
To make this easy:
“I encourage every business partnership to adopt a process for discussing and drafting internal agreements. These written resolutions can protect your business and your interest.”
Somebody puts up money with someone who agrees to contribute labor as their contribution to an equal Partnership. Once things are set up, and a lot of money is spent, the other Partner fails to perform, and the troubles begin. I get 2-3 calls like this every week.
Partners take advantage of partners every day and they get away with it. It is the most painful call I get. It sounds like this, “I put all the money I had into starting our business. My partner had bad credit and no money, but he promised to do all the work to get the business going.
While it seems like it should be very easy to get out of an LLC, it can be complicated. Even if the business is very small, there are considerations beyond getting your money back. In this post, I’ll try to hit the important points of getting out of an LLC Partnership. These same items apply if you want to remove a member from your LLC too.