Formalizing the partnership

Starting a business

In the IT business, companies with only one founder are a rarity, and just as rarely founders think about signing contracts with their business partners. They focus their thoughts and efforts on the main task: developing the project and showing it to the world.

The magic of trust

As they rightly say, trust is a double-edged sword — it can either protect or destroy you.
The phrase "we trust each other" is an excellent foundation for a partnership contract.
Whoever your co-founders are — colleagues, friends or relatives business should not be dependent on personal relationships.

The issue of mentality

Prioritizing personal values over those of your company may prove to be detrimental to the business. It’s just like a prenuptial agreement: everything’s fine as long as the husband and wife love each other, but once the divorce proceedings begin … that may change.

The benefits of strategic meetings

Drawing up a contract is a technical task. The lawyer’s role in formalizing the partnership begins with a strategic session. We either call or meet up with the founders or partners, usually 2 or 3 times. These meetings are for discussing the key issues.
In the end, each founder must decide:

  1. Whether it’s worth it to enter into the partnership?
  2. Whether current arrangements should be changed?
  3. How to go about it?

Issues to be discussed at the meetings

  • Vision, mission, goals and values of the business.
  • Stakes and roles of the founders and the company management mechanism(s).
  • Crisis situations and deadlocks, specifically, ways for founders to resolve such situations.
  • What happens if the founders decide to end/terminate their partnership.
  • Stock dilution, preferential rights to investment or shares allocation.
  • Participation of family members in the business.
  • What documents are used to formalize the arrangements, such as partnership agreements, corporate agreements or charters, as well as the mechanism(s) for amending them.
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