You and your business partner need a 'prenup'

Anyone else following the Elon Musk vs. OpenAI trial underway in Oakland right now? Long story short, Musk and Sam Altman were part of the team that co-founded OpenAI, the company behind ChatGPT. A decade later, Musk is suing the company, saying it abandoned its mission (and his big investment).

The trial might reveal emails, texts and all kinds of other peeks into the lives of some of the richest people in the world. I love reading about this kind of drama. But I would hate to live through it.

Most business owners don’t start out expecting to end up on opposite sides of a courtroom. But even well-meaning partners and friends disagree.

So how do you disagree well? And what happens if you need to break up? 

To find out, I spoke with James Trail, an attorney at Ginsberg Jacobs in Chicago. He’s a litigator who has represented very small businesses, like someone with a few LLCs, and very large ones, like food giant Pepperidge Farm. 

Here’s what I learned about how to formalize your relationship with your business partner so you’re both protected — and can avoid an expensive and stressful legal battle.

An operating agreement creates instructions for what you’ll do if you and your partner have a serious disagreement about the direction of your business. It can also be helpful in happier times — like if one of you wants to leave to do something else, if you come into new investment or if you reach unexpected levels of success.

An operating agreement is only mandatory if you operate an LLC in California, Maine, Missouri or New York. Trail says he’s seen “very, very successful companies” without operating agreements. But that makes the stakes higher when partners disagree. 

“If there’s no operating agreement that says what we’re gonna do, then all of a sudden — 50% of the company says this, 50% of the company says that, and there’s no mechanism to break that tie,” Trail says. 

Here are a couple scenarios Trail often sees:

Without an operating agreement, “you have to either enter into litigation or work it out between yourselves, as a buyout or something,” Trail says. “When you’re already bumping heads, it’s kind of hard to resolve that yourself.”

Business mentoring organization SCORE has a list of all the things a partnership agreement should include. It’s easy to see how this could get lengthy. But if you run through the list of questions now, you’ll probably find that most of them are pretty simple. 

“An operating agreement can be two pages long and very general, or it can be 100 pages long,” Trail says.

Start by having informal conversations with your business partner. Try working through SCORE’s questions above or read NerdWallet’s guide to LLC operating agreements.

Then, prepare the agreement. Naturally, perhaps, Trail recommends having an attorney prepare this document so they can tailor it to your specific situations — like when you want the option to exit or to discuss your ownership interest changing. 

“It’s best to invest several thousand dollars on the front end to save yourself hundreds of thousands of dollars, or even your company, on the back end,” Trail says. 

Unlike a prenup, you don’t need your own lawyer, Trail said. A business attorney can represent both of your interests.

You can put your answers in writing without an attorney’s help or use a generic agreement that you find online. That can still be legally binding. We recommend that multi-member LLCs work with a lawyer, though.

It can be embarrassing or emotional to talk about a prenup before a marriage. Just by having the conversation, you’re acknowledging that you might split up someday.

An operating agreement doesn’t have to be that way, Trail says. Think of it more like a roadmap that you can follow in both good times and bad.

For instance, “let’s agree now that, if we’re successful, that we keep building the business, we don’t just take the money out,” he says.

Trail recommends drafting your first operating agreement around the time you launch your LLC or file for a business name. 

If you start with a simple, short agreement, you can always modify it as your business grows. 

Your operating agreement can also be part of your own exit strategy. What happens if your business does so well that you want to take your earnings and invest them in a new project? 

“You should plan for a way to get out, whether that be because things are going well and you want to branch off or because things are not going well,” Trail says. 

NerdWallet’s Karrin Sehmbi finds and shares these grant opportunities.

This opportunity is for the brave and the bold. Women entrepreneurs are invited to apply to the annual fast pitch competition sponsored by the Women Founders Network. The competition is divided into two tracks, based on the nature of your business: 

A team of judges will select 25 semi-finalists from each track to advance to the second round. Semi-finalists will answer additional questions and submit a two-minute pitch video. Five finalists from each track will be matched with pitch coaches to help prepare them for the Fast Pitch Event and will receive some additional benefits. 

The final pitch competition will result in two first-place winners, one from each track. Both receive a $25,000 grant. 

The application is open now through May 31, 2026. It requires a $50 fee.

Click here to see the application.

Eligible businesses must have a female founder, co-founder or CEO or must be majority owned by a woman. You will need to be able to attend and participate in the final competition in person — Oct. 21 in Los Angeles. Applicants are responsible for covering their own travel expenses. Businesses must be for-profit and not in the life sciences or cannabis industries. 

If you’re not excited by the thought of pitching your business to a panel of judges to win some grant money, take a look at our list of 40+ grants for women to find a better fit. My colleague Randa Kriss just refreshed it with new opportunities and updated deadline dates.

You can also watch the video below for a highlight of five grants for women that are accepting applications in May.

This actually happened a few months ago, but I missed it! I’m writing this now in case you did too.

Let’s start with context. Back in 2021, the federal government passed a law that required payment apps like Venmo and CashApp to start sending tax forms to users who earned more than $600 per year on the platforms. Previously, that limit had been much higher — $20,000. (You needed to surpass 200 transactions too.)

Since then, the change has been in limbo. It was pushed back a couple of times. At one point, the IRS temporarily dropped the threshold to $5,000. 

But thanks to even more legislation, in October 2025, the IRS announced that the limit was back where it started. 

Going forward, you’ll only receive a 1099-K if you clear $20,000 and process 200 individual transactions. That means if you use Venmo, CashApp or another peer-to-peer payment tool for your business, the IRS won’t receive a tax form unless you meet that criteria.

You still have to pay taxes on that revenue, though. No matter how you earn your business income, you owe taxes on it. (This is, in fact, how they caught Al Capone.)

Did you forget to account for your Venmo or CashApp transactions when you filed your taxes this spring? You might need to file an amended tax return. That’s not as scary as it might sound — you can probably go to whatever software you used for your 2025 taxes, log back in and make the necessary changes. You might owe a penalty on top of your tax bill, though.

Think you might hit the reporting threshold this year? Make sure you have a process in place for tracking your revenue and setting a portion of it aside for taxes. 

A few suggestions to keep you organized: