Friendship is priceless and makes life worth living, but business is business and should remain so, even in cases in which business dealings involve friends. Handshake agreements can be broken further down the line. When embarking on a business venture with partners, you need a contract, even if your business partners are your friends.
Several notable examples can be cited of recent handshake deals gone wrong. An LA Times article expounds on hot startups whose co-founders have become embroiled in fierce legal or behind-the-scenes battles that could have been avoided with written contracts, including Snapchat Inc., Facebook, and Twitter.
Don’t make the same mistake those co-founders made! You need an experienced business and commercial litigation attorney to help you prepare a written agreement that protects your interests and defines your responsibilities, as well as those of your partners, in your new venture.
Why Entrepreneurs Sometimes Settle for Handshake Agreements
Entrepreneurs embarking on startups with people they like as friends often neglect to draw up written agreements for a number of reasons, including:
- Contracts take time, energy, and financial resources, all of which may be scarce in the initial phases of a startup.
- When two partners have a strong and amicable relationship, they may believe they can easily work out any disagreements that might arise between them in the future.
- Neither partner wants to offend the other by asking for a contract.
- Partners in a position of little bargaining power may be reluctant to ask for a contract, for fear of losing the deal altogether.
- The venture may be viewed as a small project initially, with little risk of anything going wrong.
Advantages to Written Agreements
There are many advantages to having a written agreement among partners in a business venture. To name a few:
- Contracts clearly define the rights and responsibilities of the parties involved.
- Written agreements give you the peace of mind of understanding your duties and obligations, and establish a general road map for your business.
- Well-drafted contracts cover contingencies that may not come up in oral discussions among partners.
- Written agreements eliminate ambiguities inherent in oral communication, where two people have different interpretations of something that was said.
- Written agreements provide protection for both sides of a deal.
- Contracts are enforceable, in case the need should arise.
Written agreements are a sign of mature companies. Seasoned business people know that both sides of a deal enter into a contract for their own protection. If a co-founder of a potential startup refuses to enter into a contract, you may want to reconsider founding a business with that person, regardless of the nature of your personal relationship.
Milwaukee Business and Commercial Litigation Lawyer
At Kerkman Wagner & Dunn, our Wisconsin attorneys have reviewed and opined on contracts, negotiated contract dispute settlements and buy-out options, and effectively prosecuted and defended contract disputes in state, federal, and appellate courts. We are well-versed in the law surrounding contracts.
Our Milwaukee lawyers have an extensive business and corporate client base, including Fortune 500 companies. Our goal is to meet your business needs with cost-effective, professional representation. Contact us for skilled legal assistance with the written agreements you and your business need.