Friends or Foe, The Importance of a Contract!
Regardless of what business you're in, how old you are, how long you've been doing business or who you're doing it with, an extremely important part of doing business is a contract. This is truly the only thing that's there to ensure that your partners do what they say they will do. It's also the only line of defence you have if you do not see eye to eye with your spouse, which normally happens in business.
Whether it's with a friend, a relative or a stranger from the road, you need to have a contract to protect both of your interests in addition to your business. If you do not have a contract, no matter how successful your company is, without one, you leave yourself open to get it all taken away from you. A contract is especially important as most problems will come up down the line, for example:
1. How much Money is spent by Both Partners.
2. Just how much of the Company each Partner Owns.
3. When and How is the fiscal investment paid back to each spouse.
4. Who controls and manages the day to day operations of a business and who has the last say in this matter.
How much money spent by the two partners will play an essential part on how much of the business each of you have. That then trickles down to who owns a larger percentage and usually gets the state of day to day operations. This is an important issue to tackle in the arrangement as some spouses are really investors that want you to run all of it. Then there are partners who invest, but what to have control over it also. This may cause some headaches as each time you go to make a choice they could challenge you on it.
Another significance of a contract is to ascertain when each spouse has paid back, this also can help save you from another partner demanding funds. This especially important once the company has or is not making much money. If they do move to sue you over this, which then could ruin more then your enterprise, as you probably don't have the funds to pay them back. Therefore a contract with advice on how revival of investments will operate is a really important post in the contract.