If you want to go into business with a partner, you can enjoy the benefits of a partnership. These include more capital, greater borrowing capacity, moral support, a wider range of opportunities, a better work-life balance, shared burden and so on.
But, a partnership can also result in issues that can negatively impact your investment. Thus, you should be careful about your decisions from the word go.
Here are three things to consider before forming a business partnership:
1. Set clear expectations
You and your partner(s) should set clear expectations to avoid misunderstandings in the future. Each party should state their goals for the business and the partnership, communication styles, preferred business direction and responsibilities. Assess all preferences and determine the best ways to achieve them. Doing this may save you from entering into partnerships that won’t work.
2. Know your soon-to-be partner
You should spend more time with your soon-to-be partner to know them, even if it’s a family member or friend. Know how they communicate, handle pressure and manage finances. You should also learn about their financial status, morals and ethics, personal goals and so on. While you don’t necessarily need to partner with someone who handles every matter as you do, it’s vital to share core values – who you are and how you wish to run the business.
3. Have a binding agreement
You should put everything you and your partner agree to verbally in writing. The agreement should include percentages of ownership, distribution of profits and losses, length of the partnership, each party’s roles and responsibilities, decision-making processes, conflict resolution methods and how one can exit the partnership. Most partnership disputes stem from issues with the contract. Therefore, every clause in your agreement should be clear.
With legal help, you can know the ins and outs of business partnerships and draft binding documents.
