by Patrick Watt | Guest Contributor | Business
Starting a business partnership has its advantages and drawbacks. When observed at face value, it might seem easy to run. What happens though, when unprecedented circumstances arise, challenging your relationship with your business partner? For a partnership to thrive, it is paramount for both partners to understand each other personally and professionally, and apprehend how their alliance will help grow the business. Outlined below are five tips to follow when starting a business partnership.
Assess You and Your Partner's Interest in The Business
Assessing your interests will help maintain a healthy business partnership and prevent conflicting interests in the long term. Sit down with your partner and engage in an honest discussion on the motivations behind the business. While at it, assess whether you have aligned interests. Whether self-indulging or focused on leaving a positive impact on the society, having this talk earlier on will help define the mission and visions for the business.
Define Roles and Responsibilities
It might be challenging to define roles and responsibilities when the business is at its infancy phase, and business operations are informal. Many hurdles might arise hence calling for flexibility in handling tasks. Nevertheless, you ought to eventually clarify your roles as per you and your partner's strengths. As you define roles, assess your time investments in the business to assist in setting expectations and deadlines in completing tasks.
Create A 'What-If' Plan
Unfortunate circumstances might arise as the business progresses and might call on you and your business partner to discuss the way forward. A 'what-if' plan will be beneficial in identifying areas of conflict, for instance, when a partner wants to leave the company, passes away unfortunately or becomes impaired for work. Think of all possible scenarios as you create the plan. Creating this plan might be difficult and uncomfortable but will help resolve issues quicker. You can hire commercial litigation lawyers to represent the company's interest in the event of a dispute.
Select The Appropriate Partnership Structure
Depending on the roles and responsibilities of each partner, you can go for a general partnership, limited partnership or a limited liability partnership. The three have different legal acts and implications. A general partnership is appropriate when all partner equally contribute to the business, while a limited partnership is appropriate when the contribution is not equal. Limited liability partnerships protect owner's assets in case of insolvency.
Have Agreements in Writing
An agreement drafted in writing can be used as a referral to avoid partnership disputes. Verbal ones are easily inadmissible in a tribunal. You should draw a document that covers your business structure, roles and responsibilities, capital contribution and the 'what-if' plan.
The best partnerships are those in which partners have aligned interests and complement each other's weaknesses. Be honest with each other on interests in the business. Clarify roles and responsibilities of each partner. Assess all possible factors that might hinder growth and affect the business reputation. Lastly, ensure you have all your business agreements and proceedings in writing.