How Operating Agreements outline the financial and functional decision-making of a Limited Liability Company (LLC)
A recent New York Times article titled Infighting Threatens to Fell a Venture Capital Firm
highlights the need for business partners to prepare Operating Agreements and Partnership Charters.
xFund was formed in 2011 between two partners who eventually started fighting over the dismissal of an employee and control over the firm. As if it couldn’t get worse, in March, Xfund’s accounts were frozen after both partners sent contradictory orders to the fund’s bank. These disagreements have brought the $100 million fund to court, halting new investments, and, overall, creating a giant headache that detracts from running a successful fund. One partner filed a restraining order against the other!
Spera Law Group recently started working with psychologists at BMC Associates, the developers of the Partnership Charter process, to provide business owners with a clear process to answer tough questions before starting to work together.
What would have happened if Xfund’s business partners had determined who has authority to fire an employee before the situation occurred? This venture capital fund didn’t fail when the partners started arguing. This fund started to fail as soon as the partners failed to plan their own partnership.
Are you trying to build a solid business partnership from the start? You’re on the right track! Learn more about our 4-step process of creating Operating Agreements for business partnerships.