Running a business is hard work and sometimes precarious. Some business owners make the fatal mistake of making the business unnecessarily precarious.

Every business owner in business with another person (related or not) should have in place a shareholders’ agreement (or partnership agreement if appropriate).

No business owner should find himself in the position where time, energy and mental focus is on trying to resolve misunderstandings, or worse a dispute or an unexpected event, such as death, divorce, incapacity through illness, for which there is no fallback mechanism to get you out of what is likely to become a rapidly escalated crisis.

It is no exaggeration to say that in my experience of witnessing business owners falling out because they failed to put in appropriate safeguards or a mechanism for dealing with life events, such as the death or long-term illness of a shareholder, it resulted in an intractable damaging situation – for you, your business and your financial stability.

Such situations are an immense personal toll which affect the business regardless of which side of the fence you are sitting, whether you are trying to get out of the business or you are trying to agree the purchase of an owner’s stake in the business, whether from the owner or his/her family or some other party in the event of his/her death.

The right agreement sets the framework to deal with situations that can and will almost certainly arise. No matter how well you get on now with your business partner, no matter how fit you are or young you are or how well you get on with the family of a business partner life events can and do happen.

It is absolutely vital that you put in place a shareholders agreement (or partnership agreement if appropriate) for peace of mind and so that everyone is clear as to who can do what, what happens when it goes wrong what happens when an unexpected life event hits you or the other business owner.