10 Secrets for a Problem-Free Partnership
Working with a business partner can be a match made in heaven or a bad date from hell.
Here's 10 tips you can use to find your business soulmate and keep the love alive:
1. Find a partner you can trust
A partnership is formed automatically when you start operating a business with another person. And a partnership does not have limited liability, so your personal assets and the partnership assets are considered company property. That means once you start operating a business with another person, you're personally liable for their business decisions. Your personal assets, like your house, car, and bank account, can all be used to pay for their business debts...even the ones that you didn't agree to! Prevent this from day one by finding a partner you can trust. Or see our blog post: 5 Questions to Ask a Potential Business Partner
2. Know your individual strengths and weaknesses
Are you a creative genius who is allergic to numbers? A day to day manager who struggles with the big ideas? This will help you find your business soulmate who can balance out your work style.
3. Decide what roles each of you will play
Does one partner focus on customers while the other focuses on operations? Who will be responsible for what tasks? What happens if you disagree on something?
4. Create a business plan together
Are you on the same page about where you want your business to be in one year, five years, and ten years?
5. Register your business as an LLC or a C Corporation
That way, your personal assets are not considered company property. You'll only have to use company assets to pay for you or your partner's business debt. Read How to Register Your Company to learn how.
6. Open a company bank account
Sure, it's easier to have one partner handle the finances, but it's better for the relationship if all partners have complete access to them. Plus, if you followed tip #5 and registered your company, you'll need to keep your business and personal assets in separate accounts to keep your limited liability protection.
7. Draft a partnership agreement
This will help you both to set expectations and prevent future problems.
8. Talk about how you'll fund the business
Will each partner be contributing a certain amount of time or money? How often will partners be contributing?
9. Talk about how you'll split up profits and losses
Will it be equal or according to the amount of time and money contributed? Will you split the profits biweekly, monthly, quarterly, annually?
10. Talk about the break up
What if someone has an emergency and can't work for a few weeks? What if someone wants to take a week-long vacation? What if a partner wants to sell their half of the business? What if someone wants to end the business completely? Planning for these situations now can help you navigate them smoothly later.