A business management agreement is a contract used with the owner of a business engages another party to run the business on a daily basis.

Application for business people

Business management agreements are useful for business people who want to use a manager or a management company to run their business. It may be that the business owner is too busy with other commitments to devote the time necessary to running the business properly. Alternatively, a manager may have superior skills and experience working in the particular industry. Whatever the reason, business management agreements are vital for protecting the rights and obligations of each party when the management of the business is performed by someone other than the business owner.

The terms of the business management agreement will vary significantly depending upon the level of involvement the business owner wishes to retain. The business owner may wish to have very little involvement, in which case the manager may be responsible for all tasks associated with the business, from hiring and firing staff to purchasing supplies and developing strategy.

In other cases, the business owner may wish to be consulted on key decisions that impact the business and have the ultimate say on key issues. In either situation it is very helpful if the manager and the business owner maintain a professional and honest working relationship. This is facilitated by a clear and thorough business management agreement.

6 key things to consider

Six key factors that must be considered when entering into a business management agreement include:

  1. What are the management fees payable to the manager? Is it a set rate or is it to be based on commissions/profits?
  2. What is the term of the management agreement?
  3. What is the exact nature of the services that the manager will provide?
  4. What are the obligations on the business owner? Do certain decisions need owner approval?
  5. What happens if there is a dispute between the parties?
  6. How can the management agreement be terminated?

Joe Kafrouni
Legal Practitioner Director
Kafrouni Lawyers

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

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