In this week of Valentine’s day, we wanted to show some love to your business partner.
Or – potential one.
Partnerships are fantastic for creating greater, faster growth. Two (or more) heads are better than one.
But. It. Is. Literally. A. Business. Marriage.
Your partner’s mistakes are YOUR mistakes. You share the profits AND the LIABILITY.
Yaaaa…..sounds like a marriage, right?
People change when they lose money and when they gain money.
The best time to codify your agreement is when your have ZERO money.
To arrive at answers without too much company heartache and heartbreak, consider the following tips when you choose a business partner:
Prevention is key: As with a marriage, having tough conversations in the beginning of a business partnership can save you lots of headache down the line. Get on the same page right out of the gate. What’s more, people change when companies gain and lose money, so prudent action to answer the tough stuff should be taken when the company has no revenue. As it stands, a tough day of negotiation will always beat out months of fighting during a lawsuit. Consider dedicating a full day to hashing things out with your partner(s)—call in your advisory board or mentors and question every tough scenario that you can envision for your personal partnership and the business.
Speak up: A closed mouth will never get fed. It’s that simple.
Take your emotions out of it: Explain your expectations for the business clearly and factually, then your personal expectations in regards to compensation (monetary or otherwise) in the same manner. Differing opinions will surely arise, but the key here is to convey those expectations early and plainly and to come to a middle ground.
Commemorate your decisions in your partnership agreement/ operating agreement/bylaws and business mission statement: At this point, a buy-sell agreement or cross-purchase agreement should be considered to protect the business.
Keep the conversation rolling: Effective communication is ongoing. Revisit the tough questions listed above and others important to your business every year when you file your annual report and taxes, or when the occasion arises.
Regularly look over your operating agreement, bylaws, and partnership agreement to explore what’s changed that year: Expectations? Roles? Credit? New marriage? Talk the changes out and amend your agreement accordingly.
Call in reinforcements: If you reach a deadlock with your partner and can’t find resolution on a tough topic, take the conversation to your advisory board or trusted mentors for help with an answer. Determine a loose agenda beforehand (loose because many issues lie dormant until a trigger arises) with the key issues listed. Consider your own best/worst case scenarios and explain yourself clearly, and invite your partner(s) to do the same. Consider having your mentor(s) mediate so that the agenda gets addressed. Agree beforehand to follow all decisions from the board, with written summation and action steps. If this isn’t feasible or no decision can been reached, consider mediation and then arbitration.
As always – read carefully!
Enter the necessary Agreement: The Partnership Agreement.
Other Street name: Founder Agreement
Ideally, you want to present and sign the Partnership Agreement BEFORE you enter into ANY type of partnership. The next best time is NOW.
CONTRACT TO USE:
Partnership Agreement: This agreement may be used between two people who want to enter into a general partnership (not a formal company as an LLC or Corporation). Can also be used as a placeholder for the partnership until a Company structure (LLC etc.,) replaces the terms of the partnership.
Suitable for any: 2 or more individuals, 2 or more Companies
Company (LLC, Corporation – S-Corp/C-Corp, Benefit Corp, Non-Profit). This template comes with the Agreement & FAQs that answer the top questions for the Recipient, and the included Action Sheets guide you as you consider the information to create a partnership.
To your choices!
CEO of Biztoco
*Information is for general, educational purposes only and is not intended to create an attorney/client relationship. Please consult your legal professional for specific questions to your particular situation*