How To Enjoy The Pluses Of Your Business Partnership While You Avoid The Pitfalls

Business partnerships are personal

Let’s be clear, great partnerships produce synergies where one plus one is a lot more than two!

And I don’t want to dampen your comrade in arms, world domination momentum. You’re going to need that and a healthy dose of talent to get your business up and running successfully.

But before you jump into the middle of things, the whole idea of what partnership means to you is worth taking a closer look at.

Partners can share the load, double down on investment, leverage complimentary talents, and watch each others back when it counts.

If you click together, hold common values and share a passion for what your business is all about, you have the essential secret sauce that makes partnerships thrive.

But, you still need to make sure you know what you are your partner are like together when you disagree. I mean really disagree! Frustration and disagreements are inherent, but working against each other when things get gritty, well that’s another thing.

Partnerships are also professional

So, you’ve established that your styles and talent are complimentary – right? And you know how to resolve conflict constructively.

Now it’s time to look at HOW your partnership is structured.

While some business partnerships are simply an informal collaboration between two people, others are carefully structured corporate or limited partnership agreements. Which option is right for you?

If your partnership is a short term venture, something complimentary to your core business, then you can make an informal agreement work pretty well. Make sure your business and legal risks are covered, and off you go.

But if this is going to be your life’s work, you need to invest in a legal arrangement such as a limited partnership, or an incorporated venture.

Pre-planning is how you avoid pitfalls

In any partnership – formal or informal – there are a few things you‘ll be better off dealing with right from the get go!

It might feel as sticky as negotiating a prenuptial, but talking about potential future issues now is a lot easier than when they occur.

Best advice ever? Document your agreement! Hire a lawyer and make sure your agreement specifies how major decisions will be made!

This is your life’s work, and the same goes for your partner. When you keep that perspective in mind, you’re miles ahead when you agree how you’ll deal with events like these:

You want out – for whatever reason – what’s your exit plan? Quite commonly partnerships include something called a “shotgun clause”. This means that if you offer to buy your partner out s/he can turn the offer around and buy you out for exactly the same terms. Shotgun clauses keep stink bids off the table.

The business needs a cash injection but you’re the only one with money to contribute. Do your dollars mean you take a increased ownership position, or are they a loan to the biz? If you’re buying a larger share of the pie, how much more should your contribution be worth? Agreeing ahead of time how additional equity contributions will be treated saves a lot of heart ache later in the game.

You owe money to the feds or the bank, the business is strapped and you’re flat broke, but your partner just inherited his grannies’ estate. In an informal partnership you’re both on the hook for 100% of money owed … so creditors are headed straight towards your partners’ recent windfall. When you plan for the long term, protecting your family and personal assets is an important consideration.

Or maybe there’s a bulging bank account and you’d like to pay yourselves a great big bonus, but your partner wants to double down and expand operations. How do you decide what’s “enough” capital to leave in the company or what expansions the biz will undertake? Is a majority vote enough, or do you want some decisions to be unanimous?

Happily ever after

The business world is richer for collaborative relationships. I believe that without reservation. If you and your partner have common values, mutual respect and a shared vision, you have the essential ingredients of a great collaboration.

So put your thinking-cap on and agree how you’ll handle the ups and downs of business and you’ll added the secret sauce that keeps you out of the tabloids … and the bankruptcy court!

Now put some wheels on things and take action! What’s one area you need to discuss with your biz partner to clarify How your partnership operates?

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