THIS IS A CAUTIONARY TALE
All the partnership expertise I have accumulated over the years did not prepare me for an unexpected, incomprehensible and intolerably maddening partnersh*t situation I now find myself in. For something I did not do.
I preach accountability first and foremost. I thought I was being accountable when a recent partner contributed his work samples to a website we created to service just one client.
This man and I came back together at the request of an old client to refresh a brand we had both worked on for years. He and I had not worked together since 2006 but kept in touch as friends.
Because of my issues surrounding a former partnership breakup and the way business has changed to more of a gig economy, we decided to form an LLC as a safe place from which to secure banking accounts and serve the client.
Our concept was simple: a legal entity; no employees including us, i.e., owner draws and 1099’s for subs; no joint assets, either physical or monetary; fees split down the middle; a little website to let people know we were legit; and a simple mission: serve the one client in the simplest way possible.
We had a lawyer draw up a formal partnership agreement but decided not to sign it since it addressed issues we did not and would not have based on the way we were working. This little company was very specific and we had no intention of growing it since both of us are at a point in life where work is part of life, not all of life. A liberating time to be sure. Besides, in retrospect, no agreement would have prevented what happened.
I have been in the ad business since I was 17 years old, first as a model in NY and then as an agency owner. Being in a business for so long brings with it assumptions.
In this case, I assumed my partner owned the photographic rights to the images he brought in as work samples. So it never occurred to me to ask him the question: ARE THESE IMAGES LICENSED? My only question was: HAS YOUR FORMER AGENCY GIVEN YOU PERMISSION TO USE THIS WORK? Turns out that was a good question, since in some cases the answer was yes and in others, no.
But back to the licensed images issue.
My partner had given a file of mostly FPO (for position only) images to the programmer to begin the website build. The intention was not to use these images in the final product (there were a dozen or so) but to swap them out with our new work that was just becoming available. We did a quiet launch to test platforms and responsiveness, telling no one the site was live. We were about to delete the FPO images and upload new work when I got called away to attend to a near-tragic and ongoing medical issue surrounding a family member. I never went back to the business and am just now going back to work, nearly 8 months later.
Coincidentally, my partner was also called away by hospice to go to his father’s bedside. He also did not return to our little company since these life situations made it impossible to properly serve our client.
For about 30 days, we forgot about the website. In this period of time a photographer search tool identified two of the FPO images as not licensed.
The result? The photographer filed a lawsuit. A giant, upsetting, stress-causing, expensive lawsuit over something I had zero knowledge about and that was purely situational.
And so because we are partners, my company was named in this suit. I am in the company. Hence, this became my problem too.
My now-former partner (predictably) is dodging so this has become a giant pain in my ass. The stress destroyed the partnership, the business, finances and the friendship. Additionally, I have learned some other harsh lessons.
Like all lessons, this one comes down to something very basic.
WHAT IS ONE THING THAT WILL KILL A PARTNERSHIP—and a BUSINESS?
Making assumptions. Assuming you know all the answers guarantees that you don’t. And that is fatal. So before you act, think about these things:
- NEVER ASSUME YOU KNOW IT ALL. I urge all of you to be very careful around potential partner and legal issues. Based on your specific industry, create a list of relevant questions to ask each other before you do even one thing together. The law does not care that you are not informed.
- NEVER ASSUME A PARTNER KNOWS IT ALL. Often we get too close to our own businesses and don’t stop to consider potential pitfalls. Small businesses cannot afford a legal department and operate under the assumption that all participants in the business not only know the rules but operate within them. Clearly this is not the case.
- NEVER ASSUME YOU ARE AN ISLAND. When you have a partner, their sins become yours, no matter how small the business is. I asked my attorney,”If a partner was selling drugs out the back door or was running a gambling ring on my server without my knowledge, am I responsible?” His answer? “Yes.”
- NEVER ASSUME THAT A LAWYER IS AN EXPENSE. It is an investment. I recommend you get a lawyer to avoid a lawyer. The world of litigation is harsh and cruel. Avoid it at all costs. I avoided it for the 45 years I’ve been in business. And now it’s in my face over something I did not do.
- NEVER ASSUME A CORPORATE ENTITY IS PIERCE-PROOF. We discovered that an LLC is not the protective mechanism we are all led to believe it is. There are certain laws, Copyright Law being one, that pierce the corporate veil. A lawyer will be able to earmark those laws that apply to your industry.