Is A Partnership Right For Me?

 If you are thinking about creating a business partnership with a longtime friend, relative, or associate, keep in mind those things that most often ruin a small business.

1) Partnering vs. Employing - If you don't have the money to hire an employee, making them a partner will not solve your problem. If you have the idea, but someone else has the talent, find a way to hire them as contract labor.. do not give away something you don't have to.

2) Nothing in Writing - if it is not in writing, it doesn't exist... or it will just cost you a ridiculous amount of money in court costs. Find a great lawyer and keep their business card on you at all times. Make sure that you partnership is an actual partnership agreement, and not just the 2 of you working together.

3) When the relationship is new, don't worry about sharing capital, maintaining a bank account, etc... Share your expenses instead, and just let the money accumulate. This way, each of you is equally invested financially, and there is little risk of someone running away with the profits.

4)There is a such thing as a limited partnership.. learn it.. use it! This simple arrangement allows for the partners to work together without either creating liabilities for the others actions or obligations... always a good idea for a new relationship where trust may still be a factor.. or if someone has more to lose.

5)Knowing when/where/how to quit. Make sure your business has a pre-nup. This document says what happens when the partnership is over. Who gets what and how. There are typically other items to note, such as options to buy out the others interest, and at what cost.

6) Do you think you'll be friends if the business fails... honestly, probably not. Think about your divorced friend, are they still close with their ex? probably not. This same applies to a partnership. Generally when things go sour, someone always feels that blame can be placed, or you just end up seeing qualities in your friend that will forever taint your image of them.

7) Even split of ownership. This always seems like a good idea, but most likely will result in problems because somebody has to be the boss.. and the person who is being bossed will take offense at some point, and the person bossing will always feel like they have more responsibility or are doing more work.

Most importantly, you should be able to discuss all of the above with your partner.. if you cannot candidly discuss the dynamics of your partnership, then it is either premature, or wasn't meant to be.

If you want to know a good idea for managing your soon to be partnership, consider the formula used by Baskin-Robbins. After agreeing to be partners one day, each of the friends started their own shops which they grew for 2 years before merging their businesses. They proved to each other they could do it on their own, and as a result were confident that the result of their partnership could be no less than success. Hopefully this helps some of you to better your future business experiences. Good luck!

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