Don Brenner, Stark & Stark

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Published in U.S. 1 Newspaper on February 2, 2000. All rights

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Partners, not Friends

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Don 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 what

will happen if the company doesn’t work out. Specifically: How is

the buyout going to be financed in the case that someone leaves or

dies? "You don’t want the business to be drained of its equity

when one of the shareholders wants to leave," says Brenner.

Create an employment agreement so you can’t be summarily

fired. "I’ve tried people who have gotten into small corporations

and one or the other gets fired because there’s been a falling out

among the shareholders and they are in their 50s and they have no

way of retrieving their equity."

It happened to one of Brenner’s clients, in fact. "They

basically locked my client out and said have a nice life," he

says. "Here he is, 62 years old, with two kids in college, and

he has no income, and couldn’t get his money out of the company. All

of that could have been avoided."

— Melinda Sherwood


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