Business Management Agreements: What You Need To Know
What is it?
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 small business people
Business management agreements are useful for small 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:
- What are the management fees payable to the manager? Is it a set rate or is it to be based on commissions/profits?
- What is the term of the management agreement?
- What is the exact nature of the services that the manager will provide?
- What are the obligations on the business owner? Do certain decisions need owner approval?
- What happens if there is a dispute between the parties?
- How can the management agreement be terminated?
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Joe Kafrouni, Accredited Specialist in Business Law, Kafrouni Law
Disclaimer: This article is general information only and is not legal advice. Before acting on it, get advice on your own circumstances. To the extent the law allows, Kafrouni Law accepts no liability for any loss arising from reliance on it. This article is the copyright of Kafrouni Law.
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