Legal Question in Business Law in Texas

Working partners

I own a tanning salon and was thinking about bringing on a ''working Partner'' for some working capital. is this a good idea?


Asked on 6/30/08, 9:47 pm

1 Answer from Attorneys

James Waite Winters & Waite, LLC

Re: Working partners

It can be, but here are some things to consider:

1. How much equity will your new partner own? (i.e., what % of the business)?

2. Will you continue to have control over day-to-day business operations, or will decisions be shared/voted upon? If so, who will have more votes?

3. How will income be distributed? Will you continue to draw your current salary, or will that change based on your partner's distributions, if any?

4. What happens if one of you wants out? Does the other partner have to buy you out? What if one of you wants to sell his interest to someone else? Should the existing partner have a right of first refusal (to buy it first), or should the seller simply be able to sell his interest to anyone?

5. If one of you dies, does the deceased's interest go to a spouse, parent or child? If so, who will vote the equity?

These are just a few of the issues to be dealt with when you take on a partner. Putting them into a written agreement can prove valuable in the future, but it requires a little time and effort up front. Discuss them with your potential partner, and if you reach agreement, you can incorporate all of them into a shareholders' agreement (if you have a corporation), or a partnership agreement or LLC regs if you have another form of entity.

I do quite a bit of this. Feel free to contact me if I can be of help.

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Answered on 6/30/08, 10:14 pm


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