Why Owning a Business 50/50 is a BAD Idea

Who is going to break a tie when you and your business partner don’t agree on something?  Sure, in the beginning business partners never argue, they never disagree and they certainly wouldn’t let the business suffer because of a little spat…  It’s when the business starts making (or losing) money that business partners often find themselves at odds with each other. 

But Gina, we’re one step ahead of you – we have an operating agreement.  Oh yeah?  Does your operating agreement have a deadlock provision?  No?  So when you and your partner disagree, you’d better figure it out or duke it out in court.

Unlike other states, Nevada laws don’t include default statutes that dictate what happens when partners fight.  Dueling partners have two options – kiss and make up or duke it out in court.  Given the fact you could spend years and hundreds of thousands of dollars in court trying to settle a spat, the partner who “wins” doesn’t really win after all.

So if you’re in business with someone other than the reflection in your mirror, make sure you have an operating agreement.  And if you share ownership 50/50 (please make it 51/49 so I can sleep at night), make sure your operating agreement has a deadlock provision.  A deadlock provision dictates how a disagreement among equal partners gets handled, with a minimum of bloodshed.  If you insist on distributing ownership equally, get yourself a deadlock provision.  And thank me later when it keeps you out of court.