Don’t be too quick to make a decision about taking a partner.
The wrong partner is worse than no partner at all. If after careful consideration you decide that taking a partner is the best option for you, the first rule of thumb is that don’t choose a partner that is just like you. If you’re both bringing the same skills, how will you manage and assert different roles for each one to take? On the other hand, both partners must share the same vision for the business to be established.
After all, you’re each going to be putting in considerable amounts of money, time and effort. You need to be working towards the same goals, for both the short-term and long-term visions of the business.
The partnership agreement:
A well-thought-out and formally executed partnership agreement is a must for a successful, long-lasting partnership. The partnership agreement, according to Robert Sullivan, should include:
• The full description of each partner’s responsibilities in operating the business, including who has responsibility for matters such as hiring and firing, tax issues, purchasing, etc.
• Clear language about each partner’s initial financial contribution and how profit/loss will be divided.
• Provisions that spell out the timing of the withdrawal of partnership profits.
• Clear, easily understood “buy/sell” provisions in the event that one partner wants out. Spell out how the value of the business will be determined in this situation, and how a buyout will be executed.
• Provisions for continuing the business in the event of death, disability or withdrawal of one of the partners.
• A prohibition against either partner becoming involved in another competing business.
Are you in a partnership? How do you and your partner delegate tasks and manage your partnership effectively?