When establishing a co-owned practice, it is an important step to put in place a shareholders’ or unitholders’ agreement (‘business co-ownership agreement’).
A business co-ownership agreement should contain a clear set of guidelines for operation of the business and the relationship of its co-owners across a range of key matters.
By having agreed processes and mechanisms in place for how things are to be done, the agreement can help to provide a smoother and clearer path through various matters that may arise. This can then allow the co-owners to maintain focus on operating the practice and potentially avoid expensive legal costs.
Generally, it is easier and quicker to settle on an agreed regime early in the practice journey when everyone is forward focused and wanting to work together. It gets harder to reach agreement if issues in the business or the relationship develop.
However, even if your practice has been up and running smoothly, significant change can happen quickly, unexpectedly and for reasons outside your control (or that of your business partner). Therefore, implementing a practice co-ownership agreement for an established business can help you better manage difficult situations as they arise.
The following are key matters that are often included in a co-ownership agreement:
As well as the above, business relationship agreements often cover many other matters but are tailored to reflect the future plans of the practice, having regard to the age, financial position, expertise and personalities of the owners.
Therefore, it is recommended an experienced commercial lawyer is engaged to prepare the agreement.
If you need further information or advice specific to your circumstances, please get in touch with the team at Cutcher & Neale.