CAVEAT; WARNING; CAUTION; NOTICE; STOP; WHOA: This article is not intended to convey legal advice to any person, firm, or corporation in this state or any other state. It is intended to point out some issues and stimulate thought. If this article raises any questions for you or issues that need to be addressed, you should consult an attorney and/or accountant in whom you have trust and confidence. Having said all that, let us now begin.
Do you own a commercial gym, a home gym, a garage gym, or gym equipment? Do you have a partner, or are you a shareholder in a corporation? Are you married? Is your partner married? One of the things that I always insisted upon when drafting a partnership agreement was a provision for it to end by way of a buy-sell provision. When entering a partnership, the parties never envision its termination and think they’ll be partners forever, which is rarely the case. There is often a formula in many industries to value a business. That should be in every agreement or such other formula as the parties may agree.
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I once had two doctors who had been together for many years and finally had enough of each other. There was no formal agreement and no formula to end the partnership. I suggested that one of them name a price and the other could buy or sell at that price. They agreed, and we worked out the details and successfully separated.
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What if your partner dies? Do you want to be partners with his wife or relatives? Is there a provision in your agreement that makes provisions for this eventuality? Why not? We meatheads do not always tend to business in a business-like fashion.
Have you created a device to aid in your training? Can it be patented? Have you done so? Why not? Do you let others freely use it and/or reproduce it?
Does your gym or training concept have a name or logo? Is it protected? Why not? Do you have T-shirts, hoodies, and /or hats with your gym name or logo for sale? What if someone started making and selling them in your town?
Are you a shareholder in a corporation and an employee of the gym? Is your job protected? Can you be fired without your stock being purchased and, as a minority shareholder, never reap a dime from your stock?
A friend of mine was a 50-50 owner of a gym business. His partner, however, owned the building and all of the equipment. A disagreement occurred, and he was summarily fired. Out on his ass! Karma, however, intervened, and he landed on his feet at a very wealthy assisted living complex. Shortly thereafter, the gym folded because a new YMCA was built nearby. Could this happen to you? Do you run a gym owned by others? Do you have an employment contract? Can you be discharged for any or no reason? If the gym changes hands, are you protected? What, if any, leverage do you have?
To complicate matters a little further, if you own a gym and are married, what happens to the gym in a divorce? Did you own the gym before the marriage or not? All states have some form of equitable distribution. The matter will probably be resolved there, but at what cost to the gym operation? This is applicable particularly if the gym is the only source of income for the family.
If you have a partner in a commercial gym, and he gets a divorce, are you protected? You can be if there are provisions made in the partnership agreement that his interest can be converted to money that he and his wife can fight over without harm to the gym operation.
The same thing can be applied to a gym composed of corporate shareholders. What do you do to assure your gym members that the gym is in no danger? Will you have the gym operation continue as usual? Or should you wait until the question arises before addressing it?
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Questions, questions, and more questions with no answers. That is the purpose here: to raise awareness, to stimulate thought, and to focus on unresolved issues. The purpose of the article is not to answer questions but to make you aware of issues that may need to be addressed and to cause those of you to whom any of these issues apply to think and seek the necessary help to resolve them.
Issues, forever unresolved, may never come to fruition and impact you adversely. You may skate through forever or you might NOT! Are you willing to take that chance? It has been my experience that it is very difficult to be smart for now and impossible to be smart for the future. However, you can address every eventuality that you can and seek and obtain competent legal and/or accounting assistance to provide and prepare for these eventualities.
