Having a partner can be beneficial for many business owners. However, not setting up the partnership correctly can have serious consequences.
If you are thinking of starting a company, you should make sure you are going into business with the right individual. You should also write up an agreement that defines roles, ownership and other important information.
Choose the right partner
According to Inc., it pays to take the time to choose your partner. It helps if you have worked together before, but whether you have a history or you are both new at starting a business, you need to have some important conversations. First, you should trust each other and share the same vision and mission for the business.
A partner should have different skills than you, so that all areas of the business are strong. It is also important to have detailed conversations surrounding money and the percentages of ownership. Although deciding to split the business 50/50 seems like the best idea, realistically this is usually not how things work.
Other things to discuss include who will carry out daily duties, how to divide profit and losses and a plan to expand the business.
Have a strong partnership agreement
Once you have found a partner who will help your business become a success, you should write up a partnership agreement. The U.S Chamber of Commerce outlines some of the important elements of the agreement:
- Percentage of ownership
- Detailed list of each partner’s responsibilities
- Division of draws, profits and losses
- Addition or withdrawal of a partner
- Binding authority
Even with strong partnerships, disputes occur. You can also include in the agreement how you will handle conflicts, such as going through arbitration, mediation or litigation.