A business partnership, somewhat like a marriage, can start out with some lofty goals and high expectations. Then reality kicks in, and you find out that your partner isn’t as great as you thought.
One of the best things you can do to protect your business (and yourself) from litigation is to make certain that your partnership agreements make sense. That requires putting your enthusiasm on the back burner and your emotions in check. Ask yourself and your potential partner a few hard questions.
1. What are your goals for the business?
You may find that you and your potential partner are completely aligned. On the other hand, if one of you answers this question with something like, “make a million dollars,” and the other one says something like, “revolutionize the way that recycling is done,” that tells you that your goals aren’t a match.
2. How much time do you want to invest in this business?
Unless you and your partner are both fully committed, you may quickly end up resenting each other. You won’t want to be saddled with a partner that’s only around half the time. Your partner won’t want to be pushed to contribute more than he or she already plans on giving.
3. What are your finances like?
If you can’t manage your personal finances, owning your own business might be a challenge. If your partner also has financial problems, you may be headed for a disaster. Both of you need to be open about any financial issues. That’s the only way to avoid unpleasant surprises down the line.
4. Can you agree on how to handle the hard stuff?
You and your prospective partner will need to decide how to address things like bankruptcy, a divorce, a sudden illness or a dispute between you. Make sure that you’re on the same page now, while the relationship is solid, about how you want to see those issues handled if or when they happen.
Business formation and partnerships take a lot of planning and foresight, but the time you spend now is the best investment you can make toward your future success.