Setting up a business with a partner

Going into business with a partner?  Forming a limited company and each having 50% of the shares would seem reasonable.  It sounds fair but could lead to a deadlock if you ever disagree over something serious. 

Common causes of disputes include:

• disagreements over strategy
• power struggles and poor personal relationships
• conflicts of interest, and dealings between the company and a private business owned by one of the directors
• concern as to whether the board is meeting its legal responsibilities
• concern over financial issues and potential insolvency
• service contracts and remuneration
• a change in personal circumstances of one of the key parties

If the company can't make a decision it could lead to the collapse of the company or being stuck in a company you can't get out of.  Resolving these issues can be a long and costly process, especially if you have to get legal counsel, bring in outside experts or go to mediation or arbitration.

The solution:  Get a well drafted shareholders' agreement in place, and before you fall out.