Vet Practice magazine recently interviewed Georgina Odell, Senior Associate at Meridian Lawyers – read her insights into how to succeed in a business partnership in the article “Power couple”. Thinking of going into partnership with a colleague? Vet Practice magazine’s writer Charmaine Teoh shares some legal and financial issues to consider before opening the doors to your business.
Republished with permission from www.vetpracticemag.com.au, published by Engage Media:
Some of history’s most SUCCESSFUL businesses are built on partnerships: Wilbur and Orville Wright, Steve Jobs and Steve Wozniak, Keith Richards and Mick Jagger.
“People go into partnership to combine their skills, knowledge and contacts to create a bigger and stronger business, and improve service to clients,” says Georgina Odell, a senior associate at Meridian Lawyers, a firm with a practice area dedicated to advising veterinarians. “A good business partner can provide valuable support and resources in terms of skill sets, time and marketing.”
But for every productive union, there are many more that have soured. Disputes can arise for many reasons, such as questions over people joining or exiting the business, underperformance from one party, and whether to withdraw or reinvest profits.
“Disputes can be avoided if partners methodically discuss and agree on roles and responsibilities, ethos and values, and key business, financial, operational and legal issues before they enter into business,” advises Odell.
Some of these issues include business control and profit sharing; exit arrangements; and restrictions on involvement in a competing business. Vets should also discuss whether one partner is to be primarily responsible for certain aspects of the business such as employee management or stock control.
“These details should be recorded in a legally binding partnership agreement,” says Odell. “Partners should regularly review the partnership agreement and ensure it is updated as circumstances and the business changes. It may also be useful to have a management agreement covering the practice’s day-to-day operations.”
There are a number of structures that a business can take. The simplest is a partnership, which can be based on a 50:50 split or on an agreed proportion of control and entitlement to profit.
While partnerships are relatively easy and inexpensive to set up, partners are jointly responsible for the business’s debts and liabilities, and will generally be bound by their partner’s acts. “If the business does not go well, there is more at risk for partners and their personal assets than if they trade through a company,” says Odell…