You want to start a business, but you don’t want to go it alone. How do you know if forming a partnership is the right choice? How do you make sure you choose the right partner?
How do you know whether a partnership is a good move?
-Shared costs and risks
-Support system and motivation
-Partners in a general partnership are jointly and individually liable for the business activities of the other
-You are not completely in control – partnerships mean shared decision making
THINGS TO CONSIDER – ABOUT YOU
-Think about your work style and personality. Would you work well with a partner? Would you be comfortable sharing not only the financial risk, but the major decisions with another person?
THINGS TO CONSIDER – ABOUT THEM
-Is this someone you trust? (This might be the single most important factor.)
-Someone you would be willing to “carry” if you end up working more than they do?
-Do they have a similar vision and goals for the business?
-Are they a rational decision maker?
-Do you compliment each other? Does your potential partner bring something to the table that you are lacking by yourself? For example, is one of you great at the creative aspects – like design, and one you strong on the business side of things, such as marketing strategy and networking?
-Are they financially smart?
-Do they have a strong work ethic?
-Do they share your work habits? Or, are you an earlier riser who likes to work in the mornings, while they do their best work after midnight?
FRIENDS -> BUSINESS PARTNERS?
If you decide to work with a partner, you might be considering whether to partner with a friend. Is this a good idea or a terrible mistake? It seems to depend on A) the friend and B) the friendship.
Partnering with a long time friend offers many advantages. You know this person well, and know their history. You also know that you (probably!) enjoy spending time with them. That’s great because you’ll be burning the midnight oil with this person as you get your business off the ground.
You likely have a natural “flow” to your friendship. Is one of you more outgoing? You know each other well enough to know who would be best suited for the different roles in the company.
Friends are also already good at communicating. You know how to convey what you mean and how to make your thoughts and feelings understood by this other person. This communication will be helpful when you’re trying to articulate your ideas about the company.
However, you need to consider if you’re willing to take orders from a friend, and if you’re willing to lose the friendship over the business.
PUT IT IN WRITING!
While some partnerships are extremely successful, they can sometimes turn ugly. That’s why it’s best to carefully consider all aspects of the partnership BEFORE it begins. Make sure you have exit strategies. Especially if your potential partner is a friend.
What will happen if one person wants out? What happens if you go out of business? How will profits and debts be divided? What are the exact responsibilities of each partner? Will it be a true 50/50 partnership? Will one person take on the role of “the b
oss”? What amount of money has each partner invested? What will happen if one partner dies?
Hash out the details and put them in writing. You might consider bringing in a lawyer to draft this document.
Scarlett O’Shea is a student at the Schulich School of Law at Dalhousie University. She is interning with Women in Biz Network for the summer and will be blogging about business law.