24/05/2024
Sarah and Emily, two skilled professionals, decide to start a marketing agency together. They are friends and have complementary skills—Sarah excels in client relations and strategy, while Emily is a creative genius. Excited about their venture, they draft a partnership agreement themselves, using an online template. They figure that since they trust each other and have a clear vision, there's no need to involve a lawyer.
The agreement includes basic terms like profit sharing, roles and responsibilities, and general provisions about decision-making. They sign it and start their business.
The business takes off quickly. They secure several clients and start generating substantial revenue. Both Sarah and Emily are thrilled with their early success and enjoy working together.
Emerging Issues: After a year, challenges start to surface:
Workload Imbalance: Sarah feels overwhelmed with administrative tasks, while Emily focuses more on creative projects. Sarah believes this is unfair and wants to adjust their responsibilities.
Financial Disagreements: Emily makes significant purchases for the business without consulting Sarah, causing tension. They realize their agreement lacks a clear process for financial decisions.
Profit Distribution: Sarah wants to reinvest more profits into the business, while Emily prefers taking larger distributions. Their agreement is vague on how these decisions should be made.
Exit Strategy: Emily gets a lucrative job offer and considers leaving the partnership. Their contract does not have clear terms for buyouts or handling departing partners.
Conflict Escalation: The lack of clear, legally sound terms leads to frequent arguments. Their friendship is strained, and the business starts suffering as a result. They try to resolve issues themselves, but the disagreements become too significant.
INVOLVING Curtis Okpara Legal : Realizing the gravity of their situation, they finally consult a lawyer. The lawyer reviews their original agreement and points out several flaws:
Ambiguous Terms: Many terms are too vague, leading to different interpretations.
Lack of Dispute Resolution Mechanisms: There is no process for resolving disagreements.
No Exit Strategy: The agreement doesn't cover what happens if one partner wants to leave.
Inadequate Financial Controls: There are no clear rules for financial decision-making and profit distribution.
Revised Agreement: With the lawyer’s help, they draft a new, comprehensive partnership agreement. It includes:
Clear Roles and Responsibilities: Specific duties for each partner, with provisions for regular review and adjustment.
Decision-Making Processes: Defined processes for making financial decisions, including required consultations and approvals.
Profit and Loss Allocation: Clear rules on how profits and losses are shared, with flexibility for reinvestment and distributions.
Dispute Resolution: A mediation and arbitration process to handle conflicts.
Exit Strategy: Terms for buyouts, handling a partner’s departure, and protecting the business.
Outcome: With the new agreement in place, Sarah and Emily manage to resolve their differences and refocus on growing their business. The clear, legally sound terms help prevent future conflicts, allowing them to rebuild trust and collaborate effectively.
