A partnership exit plan

If you've read this blog for some time, you know that I've written often about what happens when business partners can no longer get along. But other things can happen to break up a partnership that should also be considered when setting up a business venture. For example, what if one of you dies, becomes incapacitated, or suddenly is in a divorce that may cause your partner's share of the business to be owned by his ex-spouse?

Buy-sell agreements are integral to the start of a new venture, but a well-drafted one should cover not only what happens when it is time to end the partnership, but also what happens if the unexpected occurs. Some of the issues a good buy-sell should cover are:

1. A provision allowing for a buyout of a deceased partner's share of the business (often using the funds from life insurance policies paid for by the business).

2. A provision requiring a forced sell-out of a partner's interest if that partner is convicted of certain wrongdoing (such as felony criminal convictions) or, if he is in a profession, loses his license.

3. Contractual provisions that restrict the shares of a partner that pass unintentionally to a third party (such as through death or divorce), so that the surviving partner does not have to make partnership decisions with this new, unchosen partner.

A well-written buy-sell contract can help you envision and solve many of a partnership's long-term possible problems before the partnership ever gets off the ground. If you're in North Carolina, and need help setting up a venture or entity, feel free to contact me for an appointment.

Entrepeneurs and Adversity

More than a year now into the recession, and, for the first time in my career, having watched a largely suceessful clientele of entrepeneurs weather financial storms, I've learned that business people have handled this recession in different ways, some positive and some negative. In addition, in connection with my banking practice, I have seen other entrepeneurs deal head-on with the financial stress brought on by the recent financial downturn.

1. "Be good to the people on your way up the ladder 'cause you'll need them on the way down..." Lucky Dube, "The Way it Is." Some formerly successful people have not handled the downturn well--financially or psychologically. Perhaps they didn't save for the eventual rainy day, perhaps their business plan was too narrow to envision failure, or perhaps they had great plans, but bad timing. These people have fallen on hard times, and they're not handling it well. They're bitter at the system that they believe failed them. They're angry with the banks foreclosing on their properties and homes. And often, they wonder what has happened to many of the friends they used to have. Were these people just "fake friends" and hangars on? Maybe. But my law partner and I were joking about a particular entrepeneur in the national news who'd fallen on hard times: "What's the difference between the rich Mr. X and the poor Mr. X? The poor Mr. X is an S.O.B.!"

The point, reader, is not that poverty makes someone a worse person--it's that when a person who isn't friendly loses the thing that makes them powerful (wealth), they're still left with all their poor qualities.

2. The contrarian investor. In pure financial terms, some entrepeneurs have excelled in these down times. Yes, I watched them make wealth during headier times. But these individuals were not one-trick ponies: they weren't riding the "house-flipping" band wagon of the real estate boom, nor were they likely part of the dot-com craze a decade earlier (though they might have made money off of both). Instead, these individuals possessed something, by their raising, their genes, or some sort of gift that simply allows them to see what most of us cannot. These individuals have been able to find money-making opportunities in any economic climate, and have actually thrived.

3. The lesson learner. Most entrepeneurs--even the good ones--have still felt the pinch of this latest economic crisis, however. They're NOT making as much money as they once were--and it's not clear for some if they'll ever make that much money again any time soon. Though things are not going as well as they used to, these entrepeneurs are enduring, and are become better people for it.

Some of them have done well enough in the past that they're able to continue to survive off of their savings. Others have had to pare down their business operations--and their lifestyle. Some are even struggling with their finances, but are doing so honestly, contacting the banks, trying to work out solutions while being fair to those whom they owe. For these people, the economic recession has been a lesson. It has made them realize that even the most successful business can fail given the right climate, that even a wealthy man can lose his riches in certain circumstances. It has caused them to remember that money isn't an end-all, and that many of the characteristics that helped them first gain financial success--hard work, integrity, and thrifty living--will also help them weather the current financial storms.


This recession will fade one day, but others will likely come. Entrepeneurs, from a financial standpoint, will you have what it takes to withstand--and even financially thrive--in the next downturn? More importantly, will you have the integrity and character necessary to let you take on life's financial difficulties?

Five things I did right as a lawyer

A couple posts ago, I wrote to aspiring lawyers about some of the things I did wrong, in an effort to help some of you avoid my mistakes in your careers and personal lives. This week, however, I'd like to suggest certain things that I did right--and I hope you'll consider doing them too.

1. I kept the Bar Exam in perspective. I wanted to write this before many of you take your Bar Exams. When I say that I kept the Bar in perspective, I don't mean that I didn't take it seriously. I also am not going to lie to you and act like that I didn't worry about whether I'd pass it or what I'd do if I flunked it. No, all of those feelings are natural. I'm talking literally about what I did in the days leading up to the Bar Exam.

This was my first--and hopefully only--time that I would take the exam, so I didn't have previous history to go on as to how to study for the Bar. However, I knew what had worked for me in law school for three years, and I had to trust myself, and my own abilities, that if I simply stuck with what worked, and used my tried and true methods of study, that I'd be ok. For me, that meant setting up study schedules, allotting a set number of days and hours to each potential subject, and after planning it out, simply sticking to the plan.

I also knew myself well enough to know that if I took myself off the plan, and focused on others, I would become unsure of myself, and also might psyche myself out mentally. When I was in Raleigh for the exam, some law school classmates were, during their lunch breaks, trying to study together and compare notes with their classmates as to how they answered certain questions. DO NOT DO THIS!!!! First, you've studied all summer; eat a leisurely lunch because that one hour isn't going to give you any advantage on the exam anyway. Second, you will inevitably discover that you and your classmates answered questions differently, leading you to question your own answer, which will not only drive you crazy, but it could seriously distract you in the final legs of your exam.

I stayed focus, I stuck with what had worked in the past, and--guess what? It worked again. I'd suggest you do the same.

2. I found a good mentoring law firm. When I worked as a law clerk in Madison, Georgia, a lawyer named Jim Winkler told me that wherever I tried to find a job, make sure to find a firm that would mentor me. I'd never thought of that before, but I thought that sounded like pretty good advice and, after having worked in the law profession for 11 years, I can confidently say that he passed on to me sage words. The quality of a lawyer you will become in your career will depend, in part, upon your first formative years. Regardless of what you're taught at law school, much of what you'll learn that molds you most will come after you start practicing. Too many firms (big, small, city or country), look at that new associate as a form of cheap labor, just a low-paid minion that can do lawyer work for less. You need to find someone who's willing to give you as much as you give them--someone who's willing to teach you not only how to do a good job, but how to be the best lawyer you can be. I've helped train a couple of associates, and I've really grown to appreciate how much time my senior partner invested in me.

It takes time to train someone from the ground up, to look at them not just as a wage laborer, but someone whom you want to help reach the best of his or her potential. In the short run, my firm could've trained me for six months, then had me out in the fields making money for them. And if they had, I'd probably be not much better ten years later than I was then. But instead, the partners invested effort into making me the best they thought I could be. I hope I can do that for other lawyers, and I suggest you find a firm that can teach you the same. I don't want to disparage lawyers straight out of school who open their own shop, but there's nothing to replace the mentoring of a senior member of the Bar.


3. I got a wide variety of experience when I started. Working in a small-town firm as a new associate, my senior partner let me get a taste of everything. I handled traffic tickets, simple divorces, wills, boundary line cases--just about anything I could imagine. While I have no desire to be a general practitioner, the variety of experience I got was invaluable, because it helped me in my current practice think from a wider perspective. I was involved in a case a couple years back involving a breach of contract, with co-counsel who represented a separate defendant. I sensed the Plaintiff was lying, and something smelled bad. I finally figured out that the Plaintiff, who'd represented himself to be a large real estate mogul, was committing loan fraud and was a sham. How did I figure it out? From my days closing real estate loans, I looked at the Plaintiff's figures, and could determine that his supposed real estate empire simply couldn't have worked.

Also, practicing in multiple areas of law taught me areas which I didn't like, but steered me to areas in which I found I had a knack. As a new lawyer, try not to get pigeon-holed. Your development may proceed slower than, say, the associate at the Big Law Firm who's funneled into its Egyptian Antiquities Law Department, but you'll be better for it in the end.


4. I focused first on becoming skilled, then on the money. Because my senior partner focused on making me skilled rather than pimping me out for money, I similarly focused on becoming the best I could be. Honestly, I didn't do poorly those first few years, but to the extent I have financial success now, it is because I put in the time in the salad days. Lawyers who are hired and are not well-mentored tend to also have a mentality about money early on, and try to find the quickest way to earn a buck. At some point, though, they will plateau, and not only be mediocre, but will in fact generate less income than if they'd focused more on their skills earlier.


5. I stuck with it when things got tough. Lots of lawyers coming out of school fantasize about working a couple years with someone, then going out on their own. Five years into my practice, I was one step away from leaving, having already found a building to lease, incorporated my practice, and even turned in my notice. However, I worked things out with my partners, and now am glad that we worked together to create a better firm. This is not to say that every lawyer should stay at his first job forever--I know that's not always possible. But remember, there is power in numbers. You'll often find that with lawyers, the whole is greater than the sum of the parts, and often, lawyers with large client bases lose some of their stability and prestige when they go on their own. Think hard before you do it.


That's enough lawyerly advice for now. According to my calculations, you have about two or three weeks left before the big day. You've had your study break, now get back to work. Good luck, you can do it!