3 things you need to decide when you take on a business partner

On Behalf of | Oct 26, 2021 | Business Law |

A business partnership can be an excellent format for a new business. It allows two or more people that share a similar vision to pool their resources and create something that they may have struggled to create on their own.

Like any interpersonal relationship, a business partnership presents both opportunities and risks for the people involved. What are some of the issues that you should undress early in the creation of your partnership to avoid complications for your business in the future?

The roles and responsibilities of each partner

If everyone doesn’t agree about who contributes what to the business, then conflict will inevitably arise. Being explicit about what each partner can contribute to the growing company is crucial to making sure that you meet all of the business means and that your relationship remains a source of support and positivity, rather than blame and negativity.

If one partner expects to contribute money but not work, everyone should know. If there is an expectation about a certain amount of sweat equity contributed toward the project, that should also be made plain in a written contract for everyone to review.

What happens as the business grows 

You may know within the first year or so if your business concept will succeed or if it’s will not. Establishing certain benchmarks for both success and failure now can be important.

Otherwise, one partner may want to continue investing time and money in an operation that has not returned a profit and may feel like the other owes him that continued investment even if the business has yet to generate revenue.

When either partner can sever the relationship

Your partnership may not last for the rest of your life. Either you or your partner may decide to retire or could decide to pursue employment in a completely different industry. Having rules in place to terminate the partnership or to allow one partner to buy out the other will prevent such a decision from resulting in the end of the business or hardship for the other partner.

Knowing how to protect yourself when you start a business partnership will make the operation and maintenance of one simpler.