One step in the process of establishing a business is deciding on its structure, such as sole proprietorship or an LLC. Perhaps you are thinking of switching entities. Either way, you may choose to go with a partnership for its benefits of sharing responsibilities and bringing qualities and experience you lack.
However, before you ask your spouse, best friend or a professional you do not know to join you, you need to know what to look for in a partner. Making the wrong choice can lead to avoidable business disputes.
Choose the right partner
If you have not partnered with someone yet, do your homework before forming the relationship. Do a thorough check on the person, even if you are friends. Look at credit, criminal, work and litigation histories for a full picture. Consider personality and skill set, as well, to balance out your strengths and weaknesses. You may find that the candidate may serve the business better in a different capacity or not at all.
Create an agreement
Business relies on strong contracts for success. With the help of a business attorney, create an agreement that outlines each partner’s responsibilities. Like a prenup, discuss what would happen if the partnership or company dissolves, as well as other worst-case scenarios. It is better to prepare now than to deal with disputes later. This step will also help facilitate communication between you two.
Stay involved
Although you may each have your areas of duty, you still need to be aware and involved in what the other is doing. Problems often arise when one partner starts doing things with money or operations that the other does not know about or approve. Stay accountable to each other through records, meetings and mutual decision-making.
Address problems
Address problems as they arise instead of waiting until they escalate. You can try different resolution approaches before resorting to litigation or dissolution. However, sometimes those options are best under the circumstances.