Some of the most painful business disputes do not start with strangers. They start with friends, siblings, spouses, and longtime partners who went into business together on a handshake and never put anything in writing. When everyone is excited and getting along, a formal agreement can feel unnecessary — even insulting. But the businesses that skip this step are, again and again, the ones that end up in the most damaging and expensive fights.
If you are forming an LLC or partnership in New York — especially with people you care about — an attorney-drafted operating agreement or partnership agreement is one of the most important investments you can make in protecting both the business and the relationship.
The Handshake Deal Is the Real Risk
When two or more people start a business without a written agreement, they are not avoiding the rules — they are simply letting the state write the rules for them. Without an operating agreement or partnership agreement, your business is governed by New York's default statutes, which may divide profits, control, and decision-making in ways none of the owners actually intended.
Worse, a handshake deal leaves the most important questions unanswered. What happens if one partner stops contributing? What if someone wants to leave, sell their share, or bring in a new partner? What if an owner gets divorced, becomes disabled, or passes away? What happens to the business if the partners simply stop agreeing? When there is no agreement addressing these situations, the answers get decided in the middle of a crisis — often in litigation, and often after the relationship has already broken down.
What an Operating or Partnership Agreement Actually Does
A well-drafted operating agreement (for an LLC) or partnership agreement (for a partnership) is the rulebook for how the business runs and how disputes are resolved before they ever happen. A thorough agreement typically addresses:
- Ownership and capital contributions — who owns what percentage, what each person contributed, and what happens if more money is needed later.
- Profits, losses, and distributions — how money is divided, and when.
- Management and decision-making — who has authority over what, and which decisions require unanimous or majority approval.
- Roles and responsibilities — what each owner is actually expected to do, so "I do all the work and we split it evenly" never becomes a surprise.
- Buy-sell and exit provisions — how an owner can leave, how their interest is valued, and whether the others have the right to buy it.
- Death, disability, and divorce — what happens to an ownership interest when life intervenes, so the business is not suddenly partnered with a former spouse or an estate.
- Dispute resolution — a clear, agreed-upon process for resolving deadlocks before they reach a courtroom.
Each of these provisions exists to answer a question that will eventually come up. Putting the answers in writing while everyone is still on good terms is far easier — and far cheaper — than fighting over them later.
Why "We're Family, We Trust Each Other" Makes It Worse, Not Better
The instinct to skip a formal agreement is strongest exactly where it is most dangerous. When owners are family or close friends, they often assume good faith and shared understanding will carry them through. But personal closeness does not prevent disagreements over money, control, and direction — it raises the stakes when they happen. A dispute that would simply end a business relationship between strangers can fracture a family or end a lifelong friendship.
A clear agreement does not signal distrust. It protects the relationship by making sure everyone shares the same expectations from the start, so a misunderstanding never turns into a betrayal.
Why a Template Is Not Enough
Free online forms and generic templates are tempting, but they are no substitute for an agreement drafted for your specific business. Templates routinely miss the provisions that matter most, use language that does not hold up under New York law, or leave critical terms blank. The result is a document that gives owners a false sense of security until the moment they actually need it.
An experienced business attorney does more than fill in a form. The right attorney asks the questions the owners have not thought to ask, tailors the agreement to how the business and the relationships actually work, and builds in the protections that prevent disputes — or resolve them cleanly when they arise. That is the difference between a document that creates problems and one that prevents them.
Going into business with people you trust should be the beginning of something good — not the setup for a future legal battle. The right agreement, drafted correctly from the start, is what keeps it that way.
If you are forming an LLC or partnership, or going into business with a friend or family member, contact the New York business and corporate attorneys at Bashian & Papantoniou to have your operating agreement or partnership agreement drafted correctly from the start. Fill out our online form or call us at 516-279-1555 today.