Going into business with someone can be an exciting time for you and your potential business partner. Both sides are ecstatic about the potential to turn your idea into reality and it may seem like nothing could go awry. However, there are important things you will need to discuss with yourself and with your potential partner.
Whether this be a family member, investor, or friend, critical questions should be answered. Also keep in mind that if you’re doing business with someone new it may be in your best interest to research them before your get to far into the process of forming a partnership. Try running a public criminal record search on your new potential partner to see if you uncover anything suspicious upfront.
Remember, not all relationships are going to be perfect. You will have ups and downs in every partnership. The key is to have a clear path upfront to certain questions so when the downs happen you can work through them quickly and efficiently.
Keep in mind that this is a guide to some of the things you should know before going into a business partnership with someone new. Be sure to consult with an attorney or professional advisor.
This needs to be agreed-upon before the business is started. A record needs to be made of who will own what within the company. Some partnerships are started with an equal split, others may only be equity investors that will not physical work at the company, while other may inject no cash, but provide sweat equity. This needs to be determined beforehand and documented accordingly.
This is an important matter that needs to be ironed out beforehand. Many a business has failed from internal fighting on who has the final decision when it comes to the business. Sit down and agree on who may have final say. Having long drawn out process because you’re at a stalemate can be divesting to a new business.
Not agreeing within a business happens. In-fact it happens a lot. Having a process upfront on how you plan on resolving disputes within the company is a smart decision.
Remember, if you must head to court you will be spending a lot of money and time, and most likely your business relationship will be over. It may be wise to have a mediation clause within your partnership agreement, so you know how to proceed in the event a conflict happens.
Death of a partner
When starting a new business this detail can be overlooked. What happens if one of your partners dies? Who gets that partners interest? Is it divided equally? Should one partner be entitled to more than another? You should have these questions and more covered before your start your business.
Define job roles for each partner
It would be a good idea to discuss what roles each partner will have. This is a keen move to eliminate any confusion on what each partner’s duties will be. We have seen partnerships fall apart very quick when one partner believes the other should be performing certain tasks other than the ones he or she is performing.
Keep in mind that these are just some of the important elements that should be discussed, agreed upon, and included within the agreement when you’re getting ready to do business with someone. However, it is recommended that you seek legal professional advice from someone that can draft the proper partnership agreement that will work for you and your partners. This will able you to concentrate on growing your new business venture.