Going into business with Partners? Get it in writing.

You decide to go into business with some people based on your understanding that you will become an equal owner in a mature, established business.

You take all the steps necessary, including leaving your current employment.

But you forget to do one crucial thing:

You forget to get your partnership agreement in writing. Check out this recent unpublished Michigan Court of Appeals decision.

Relevant facts: Roth and Vickery invited Plaintiff to become part of a new business venture. Roth owned Bluestone for over 30 years. Vickery and his wife provided start-up funding for the new venture. Vickery allegedly told plaintiff the following three relevant statements:

(1) Vickery planned on starting a new vehicle-import business in Michigan before 2021,

(2) Vickery “wanted [plaintiff] to consider becoming a part of the new entity that would own that vehicle import enterprise,” and

(3) Vickery considered using Bluestone (the company Plaintiff sought partnership in) to obtain an import license from the U.S. Department of Transportation.

According to plaintiff, he “accepted and relied on Vickery’s invitation to become an equal interest holder in the business. He shut down his own business and started working for the new company.”

Plaintiff was never granted an equal ownership interest in Roth’s company, Bluestone, so he sued Bluestone and shareholders to enforce the “promise” that he alleged was made to him.

The court found that “a promise by Roth to plaintiff was never made. Plaintiff testified that Roth “would try to avoid [discussions about ownership] as much as possible,” and “would never 100 percent positively say” that plaintiff would be a partner. Plaintiff specifically testified that Roth “wouldn’t promise anything.” The testimony unequivocally established that Roth never made a promise to plaintiff, let alone a clear and definite one.

Warren Buffett famously said “I like to deal with people where I feel a one-page contract will do the job. If I have to have 50 pages in there to protect me against the guy I’m dealing with, I’ll always wonder whether I needed 51.”

Lesson here: Go into business with people you trust.

Get it in writing. Even if it is just one-page.