Whether you are working with a friend, relative, or purely a business colleague, the idea of starting a business can be exciting. You have fueled each other’s passion and creativity and come up with a plan for success. However, even though you may have come up with the idea together, becoming partners in the legal sense can be more complicated than many realize.
In the beginning, you may agree on your vision for the future, but that may change as time goes on. Here are some things you may want to consider before becoming business partners:
What are the liabilities?
There are a few ways to start a business with another person. Among the various options, a partnership tends to bring with it many liabilities, particularly when the partners do not have an agreement regarding their roles, responsibilities, and limitations.
For example, in many cases, your partner can make purchases and other decisions, whether you agree with them or not. Before you start your partnership, discuss how you will make decisions and settle disagreements (particularly important for 50/50 partnerships).
You may also want to consider incorporating to create a greater liability shield.
Are you able to delegate?
Many entrepreneurs have, by definition, a go-get-em/ grab-the-bull-by-the-horns attitude. As a result, they are often used to tackling jobs by themselves, rather than asking someone else for assistance.
Unfortunately, being unwilling to delegate can lead to resentment from both partners. The one who takes everything on (even by choice) can feel like they are carrying the entire workload for a disproportionately low share of profits. The one left with little to do may feel underappreciated and resentful. Think about the communication you have with your partner and whether you can talk to them about what needs to be done. If you know you’re going to want to handle tasks by yourself, you may want to come up with another way to combine your efforts.
Questions about starting a business? Contact a business attorney to discuss.