Is there something missing in your business? An additional service or expertise that will supplement what you already have and help you reach the next level success? You can’t be an expert at everything. A business partnership could be the answer. But what happens when it goes wrong?
Partnerships are a great way to bring new skill sets to your business, broaden your appeal (while sticking firmly to your niche, of course!) and share some of the workload. As tempting as it sounds to keep it casual, you’ll need to build your partnership with more than a handshake, though.
Plan Your Business Partnership
Launching a new partnership is exciting, but don’t get so carried away you fail to protect yourself. Draw up an operating agreement for your business defining exactly how the labor and profits are divided and how much each partner owns. An informal handshake may be easy at the time, but when you’re disagreeing over expenses or responsibilities, you’ll want a written record of who agreed to what.
Especially when you’re working with friends or trusted colleagues, don’t assume everything will always go smoothly. Defining your arrangement protects your relationship, business and livelihood in the event of a conflict. And, don’t forget, conflict can come in the professional or personal form. Even if the business is going along great, there is a personality component to a partnership. You’ll want an avenue of escape if you realize you simply can’t tolerate your partner’s style, ethics or approach.
Location, Location, Location
Not just important in real estate! When forming your partnership, what you do is only half of the equation. Just as important is where you do it. Don’t feel bound to the jurisdiction where you live when you’re incorporating. Other states have different rules and advantages that can be legally favorable to your particular industry.
Do the research, hire a lawyer, and see what your options are. This is not the area to skimp! The right jurisdiction can be the difference between winning that unexpected legal battle and losing.
Expect the Best, Prepare for the Worst
Yes, a positive attitude is important in all areas of life, but never quite so much as when you’re taking the plunge of starting a new business. Acknowledging the partnership might not work out isn’t defeatist thinking. You have a responsibility to yourself and your partners to plan for the worst.
Even if there’s no friction, and everyone does good work, sometimes a partnership just doesn’t pan out. Make sure your operating agreement addresses not just how your business will be built, but also dissolution.
Get off your duff!
Sean
image credit: Bigstock/JacobLund