As a leading lawyer, Rex Afrasiabi, explains, “It’s always good to have a partnership agreement in place to protect the interests of both partners and outline the rules of engagement for running the business. These agreements avoid misunderstandings or disputes down the line.”
Rex is a founder of one of the thriving law firms in Australia, MA legal. Best known for his keen knowledge of solving legal complexities, he navigates businesses to success by leveraging powerful growth strategies and planning needs. From a fashion career to travelling the world, and finally starting his own Law Firm, Rex has seen it all.
With strong legal expertise and years of experience, Rex has nurtured various business relationships and talks about why partnership agreements have to be one of the major decisions in a business.
Decision-makers can make or break your business
Decision making holds paramount importance in any business, according to Rex. While addressing the issues of partnership, he derived several essential points. One of them was making business decisions. Decisions such as how much share each partner will hold in the business, who will be responsible for a particular area, what will happen if one of the partners decides to leave and so on are some of the key decisions that should be made at the onset. An absence of formal agreement on these matters can often lead to conflict and disharmony amongst business partners.
Seek clarity on profits & losses
Rex says clarity on sharing profits and losses is the second thing that will contribute to your business success. Entrepreneurs invest in a business with distinct aims. Partners must agree at the outset on how business profits and losses will be shared between them. This will avoid any misunderstandings or disputes about money further down the line. “Another key issue that should be addressed in a partnership agreement is how profits and losses will be shared amongst the partners. This is particularly important if one partner is putting in more money or time than the other partners,” says Rex.
A non-compete clause can take you a long way
“Starting out together as a team looks exciting until your business partners can turn into your biggest competitors. That’s when being prepared in advance can save you from a lot of hassle”, says Rex.
When a business partnership goes sour, there is always the possibility that one partner will try and poach clients or leverage internal strategies. A non-compete agreement can stop this from happening. “At MA legal, we recommend to our clients that they include a non-compete clause in their partnership agreements. This basically means that they agree not to poach the clients of the other partner,” says Rex. A properly drafted agreement would bind not only the investor participants but also the key individuals associated with those investor participants.
Valuation framework
Rex explains another possibility of business disputes in absence of partnership agreements is disagreements as to how to value the interests in the business venture. “Without a partnership agreement in place, it becomes very difficult to resolve any disputes, particularly if one partner feels that their interests in the business have been undervalued. This is why it’s important to have everything agreed in advance,” he says.
Driven by his experience to build strong businesses, Rex has been committed to business growth and creating strong partnerships. He says, “A strong agreement is the foundation of success. Every partner should know where they stand, what they can expect from a business and how future events might have an impact on their role.”
Apart from being a visionary and a groundbreaking lawyer, Rex is widely known for his passionate entrepreneurial approaches and ceaseless goals. He is also a co-host of two business advisory shows, Real Estate Renovators and Enterpriser, a lecturer and presenter for lawyers and businesspeople, a professional judge for several national awards, sits on several boards as well as is a founding director of various business pursuits of his own with his own business partners.
