Many small businesses with more than one owner have made no provision for the inevitable: dissolution, divorce or death of an owner. The legal complications that arise when these occur can be staggering and the cost of dealing with them can literally drive the company out of business. A simple alternative is a business agreement between the individuals involved or between the business and its owners. These agreements set out specifically what happens to an owners’ interest in the business if there is a disagreement which prevents the business from continuing to operate, a divorce of one of the business owners (which may give that owner’s spouse an interest in the business under Texas community property laws), or the death of one of the business owners.

It’s easy to be caught up in the excitement of starting a new venture and not consider the unpleasant possibilities. But a little time and energy spent on preparation can prevent effects which destroy the business you have worked so hard to create. And business agreements drafted now can allow the owners to decide on a fair and equitable way to value the business so that the rights of everyone are protected, and future disagreements are minimized.

Mike Hrabal has been involved in litigation resulting from the failure to plan for business changes. You can use his experience to decrease the harmful effects of future changes and problems on your business. As the old adage goes, “An ounce of prevention is worth a pound of cure.”