Wednesday, January 20, 2016

Why Structuring Your Business Relationship is Important

With the holidays behind us and football season coming to a close, I can finally turn my attention back to you, O'faithful reader! Being an avid football fan, and a former-Eagles' fan (Chip Kelly ruined my season but at least I am not a Browns' fan), I could not help but follow the recent NFL coaching-shuffle. And this takes me to the point of this post - be careful who you go into business with and what the structure of the deal is!

This word of caution is not just directed to the franchise system you select but also to choosing your "business partners."

Too many times folks focus their attention on the due diligence that goes into selecting the right franchise (I wish there were more) and overlook their internal business structure. Just in the last few months, I have seen this with a number of clients, and individuals I am assisting as a mediator.

First, I suggest that if you can avoid having "partners" or fellow shareholders/members, avoid them. Going it alone may involve greater risk but has greater rewards and fewer conflicts.

Next, if someone wants to "invest" in your franchise-entity, make them a lender rather than an owner. There are ways to reward people who want to invest in you without giving them a piece of the action!

If you insist on "partners," make sure you visit with knowledgeable and experienced legal counsel to determine the best entity, the best structure, and the best exit strategy (in a buy-sell agreement that is incorporated into your entity documents). If things don't work out at least you have a plan.

I will admit that I was excited to have Chip Kelly come to Philly but in hindsight I would probably be happier if Andy Reid had stayed ... along with all the great players Kelly axed! Now we are stuck with his team. Good luck 49ers...