A Management Agreement allows a person or company to step in and manage (run) your business. The most common reasons to relinquish control of your business to a Manager are: (i) the Manager intends on purchasing your business in the near future; or ii.) you no longer want the responsibility of running the business or feel that the Manager is more skilled/qualified to help manage and grow the business. When entering into a Management Agreement, here are some key terms to address:
- Specify the duties that are the sole responsibility of the Manager (such as hiring/firing; paying bills; maintaining books/records; filing tax returns, etc.)
- Carve-out any decisions that require your final approval (for example, spending company funds or entering into agreements in excess of a certain amount);
- Detail the Manager’s compensation. Is the Manager getting a percentage of revenue? a fixed salary?
- Identify who has authority over the Company’s bank account and debit/credit cards;
- Include indemnification language that will require Manager to indemnify owner/company for Manager’s negligence or intentional conduct.