Today I’ll get right to it: You need to have good communication with your partner from the start or else you’ll fumble your initial corporate documents.
For example, if a multiple-owner corporation’s bylaws are less than 7 pages, that tells me the corporation’s co-founders did not have enough discussion about how their corporation should be managed, operated, transferred, sold, or liquidated. Or worse, they did have the requisite discussion but failed to implement their discussion into their corporate documents.
Since most startup company co-founders are entering into a venture with each other for the first time, the natural tendency is to avoid anything that may rock the boat. Who wants to squabble with their partner from day 1? Alternatively, enthusiasm and optimism for the new venture precludes the co-founders from discussing negative issues. Who wants to talk about “failure” when you are just starting out, right?
Both approaches have negative consequences for your initial corporate documents. Not wanting to rock the boat and unwillingness to talk about negative issues will prevent your corporate documents from becoming a comprehensive set of rules for your startup company. And when something happens with your startup company, your corporate bylaws may not be of any help.
So lay it all out on the table from the start. Discuss what should happen if one of you gets an offer to sell your shares. Talk about your respective roles in the corporation and how your corporate documents should reflect and protect such roles. And then implement your discussions into your corporate bylaws. Not only will such frank discussion help ensure your initial corporate documents better fit your startup company, but it will also lay the foundation for future open communication between you and your partner.