Creating a business with a partner or bringing someone else into your previously existing business can have huge benefits. A partner can help with investment, give a new perspective, help expansion and support growth.
No matter the reason that you are creating a business partnership, making it official with a written agreement is always a good idea. Here are some topics you should discuss with your partner and put in your agreement:
Partnership or business name – Figuring out your name is one of the first things you should do. This is also a good way to preview how you and your partner will work together, brainstorm and compromise.
Roles and authority – It’s important to set up what roles each person will be taking on and how the authority will be distributed. This is a great place to start in understanding how the dynamics of the business will work.
Contribution – What is each party ready to contribute? You can talk about money, property, services and other contributions partners are able to make. This can correlate to the ownership stake in the business.
Salary and distribution – Contribution and ownership can inform your regulations for salaries, profit and loss distribution among partners. Be careful about how you divvy this up because it can easily become a point of tension.
Decision making and dispute resolution strategies – Talk about how you will navigate decision making for the company. Are there areas that certain partners have authority over? Does everyone need to be involved? Your decisions on roles and authority will be helpful in this discussion. Setting up a strategy for resolving disputes is also a good idea. Will you involve personal lawyers or is will you have a mediator you will refer to? Do you have specific ways of communicating that will make it easier to resolve issues?
Dissolution – Though you probably don’t want to think about your partnership not working out, things happen. It’s best to have a game plan if someone needs to pull out of the business or there are irreconcilable differences and the partnership needs to be dissolved.
Death or disability – This is another unpleasant topic, but one that should be discussed. If something happens that makes a partner unable to take part in the business, is there someone else who will step in, or will their shares be bought out?
Creating a plan for your business partnership is the best way to set yourselves up for success. Talk about the difficult things now so that you are prepared for them later, or simply can see if the partnership is not going to work out before you invest.