There are many reasons for business owners to consider adding new partners, including to secure additional capital, to add needed expertise to help grow the company, to bring family members or close friends to join in building the business and to put a succession plan in place. Adding new partners can therefore provide a boost to the company’s revenues, lighten the load carried by the founder, and put the business on course for long-term success. But this decision is not without risk because the new business partners may create conflicts, disrupt the business and insist on making changes that put the company’s existence in peril.
If after carefully weighing the pros and cons, business owners decide to move forward in adding new partners, this post reviews important steps they can take to protect themselves and the business from the decisions and actions of these new stakeholders in the company.
Equity Ownership Can Be Conditional or Subject to Cancellation
One protective step business owners can take when adding a new partner is to make the addition of a new partner’s ownership conditional or subject to cancellation. This approach permits the owner to wait to grant the ownership interest in the company to the new partner until he or she has met specified business goals by a certain date or to cancel the grant of equity to the new partner if the specific goals have not been achieved by the agreed date.
Continue Reading Keeping Eyes Wide Open When New Members Join the Pack: A Cautious Approach to the Addition of New Business Partners