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What You Need to Know About Business Prenups (and Using Mediation to Make One)

Disclaimer: This article does not constitute legal advice. If you have any questions about your individual situation it is best to seek the advice of an experienced legal professional.

What’s good about starting a business is similar to what’s good about getting married: hope, anticipation and plans for your future together. To temper these future plans with conversations about what might go wrong may seem less than positive. However studies have shown that the social acceptability of prenups is rising among Millennials. Similar agreements can be drafted in close business partnerships to anticipate what you would do in the event of a business break-up. Unfortunately, just like with prenups, raising the issue can lead to confrontations over values and expectations. People can feel hurt and mistrusted when it’s suggested that a business partnership might not stand the test of time. This is why getting a mediator involved in the process can support a more moderate, fair and thorough negotiation of a “business prenup.”

Mediation Takes the Pain Out of Breaking Up

Just like in a divorce, the reasons you might want to get a business prenup can be both practical and emotional. Even if you trust your business partner and have had conversations about the possibility of breaking up the business, a more formal agreement will preserve these conversations and ensure everyone is on the same page. Memory is notoriously unreliable and obligations can be misunderstood. In any of the following situations and more, mediation can bring clarity and security to your business partnership:

– Your business might involve proprietary technology or business secrets that could emerge if your business breaks up or encounters financial difficulties. Making agreements about what to do with information you don’t want to make public is an important step. Mediation is a completely confidential process that can protect private information.
– How will a buy-out be handled when one partner wants to leave the business? How will a business partner be compensated for their shares in a business, and how is the ownership transferred? Agreeing to a process in advance can make things more efficient for everyone.
– Who does what and how does everyone get paid? The day-to-day running of the business might not seem like it should be part of a contingency plan, but just like in real divorces, partnerships can turn bitter if people in the business feel that responsibilities are divided unequally and they don’t receive a fair share of the profits. Mediation can help you make agreements that clarify your responsibilities from the beginning so that everyone feels fairly compensated.
– What happens if the business expands? When new partners join a business or a company goes public, the values and structure of the original organization can change. It’s important that business partners are on the same page about the potential of a business to change its priorities.

Even Business Relationships Involve Emotions

There are no relationships – even business relationships – that are free of emotions and conflict. When we work with businesses we use unique tools to get to the root of your relationship dynamics so the negotiation is transparent and the outcome reflects both of your needs. The approaches we use in mediation are informed by game theory, psychoanalysis and communication theory. We recognize the need to preserve important relationships in business. As well as being a satisfactory way of retaining important contacts, colleagues and friends, this can help you avoid costly litigation. Even if a business relationship ends, mediation can help manage the transition in such a way that you are left with the best of what you worked towards. Business prenups can be an integral part of managing these inevitable transitions.

How We Can Help

We are a group of well-educated mediators and negotiators with financial, legal and psychological backgrounds who can mediate all business disputes and business relationships. We employ careful scientific, mathematical and legal knowledge to get to the heart of almost any dispute and find a resolution. We offer mediation and negotiation, including individual consultation for our clients who need help achieving the best deal and protecting important relationships (sometimes called deal mediation). We mediate in a variety of business environments and at every stage of the dispute, from preventative mediation to establish good policy in beginning start-ups, to ongoing conflict management. Business mediation is faster, cheaper and more efficient than letting conflict fester or resorting to litigation. We can help resolve your dispute at urgent notice and in a fast and a efficient manner. The business mediation settlement rate is high. Please contact us at our offices in Boulder CO, Campbell, CA, Irvine CA and LA (?), to see how we can help. We are also available via Zoom, Facetime and telephone and can resolve disputes remotely.

Further Reading: https://www.allbusiness.com/why-you-should-get-a-small-business-prenup-15479441-1.html

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