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Published in U.S. 1 Newspaper on February 2, 2000. All rights
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Partners, not Friends
Top Of PageDon Brenner, Stark & Stark
Two friends quit their corporate jobs and decide to
go into business together. The business takes off, but then, after
a series of differences, one partner fires the other — the
ultimate
doublecross.
Although both partners have equal control of the company, the ousted
partner has little chance at retrieving his or her share of the equity
in the business without the prior contractual agreements, says Don
Brenner, partner at Stark and Stark at 993 Lenox Drive. “They
might have been friends in business, but never been partners before,
and consequently they don’t figure out how a buyout would be
financed,”
says Brenner, who speaks at the Princeton Chamber meeting,
“Explosion
in New Business,” on Thursday, February 3, at the Doral Forrestal
at 11:30 a.m. Call 609-520-1776. Cost: $30.
Brenner, who holds a BA from SUNY Albany, Class of 1979, and attended
Rutgers Law School, says that bungled buy-outs are becoming more
prevalent
today. “More and more people coming out of large corporations
with big buyouts and using that to start a new business and they don’t
sit down and deal with these issues up front,” he says. “What
happens when Fred and Bill, who are in lockstep at the start, have
a falling out over who owns the business? I want to point out that
with shrewd planning you can avoid these problems.” Brenner’s
advice:
Prepare a shareholders’ agreement that spells out whatwill happen if the company doesn’t work out. Specifically: How isthe buyout going to be financed in the case that someone leaves ordies? “You don’t want the business to be drained of its equitywhen one of the shareholders wants to leave,” says Brenner.Create an employment agreement so you can’t be summarilyfired. “I’ve tried people who have gotten into small corporationsand one or the other gets fired because there’s been a falling outamong the shareholders and they are in their 50s and they have noway of retrieving their equity.”It happened to one of Brenner’s clients, in fact. “Theybasically locked my client out and said have a nice life,” hesays. “Here he is, 62 years old, with two kids in college, andhe has no income, and couldn’t get his money out of the company. Allof that could have been avoided.”— Melinda SherwoodPrevious StoryNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
