How to start a business with a partner- what you need to know
Find the Right Partner
Finding the right partner or making sure that the partner you have in mind is a good fit, is the first crucial step. Make sure that you really can trust this person and can get along with them even when things get difficult. Someone with great communication skills would be a good choice to limit misunderstandings and issues along the way. Ideally, you and your partner would have complementary skills and knowledge in the business you are choosing to start.
Clearly Define Roles and Responsibilities
In order to create a successful business partnership, roles have to be clearly defined. There can be a lot of tension and issues that can arise if assumptions are made and responsibilities aren't previously delegated. Clear communication is essential to have a successful partnership. In order to avoid complications within the business, roles and responsibilities must be clear and concise.
Decide on a Business Structure
There are four different options when it comes to organizing a partnership.
The first option is a General Partnership, where two or more owners have equal responsibility and rights within the business. They are all also equally liable for obligations or debts.
The next is a Limited Partnership, which requires one general partner and one limited partner. The limited partner invests in the company but doesn't have responsibilities in day-to-day operations. This partner is only risking the money that they have invested.
A Limited Liability Partnership is like a general partnership but with liability protections. All partners have equal obligations and responsibilities within the business. They can maintain control of the business without personal vulnerability. All partners are allowed liability protections from the actions of other parties within the business.
Lastly is a Limited Liability Limited Partnership. This is a Limited Liability Partnership with the addition of a Limited Partnership. It allows a limited partner to come in and invest in the business that already offers personal liability protections to the main controlling members.
Create a Partnership Agreement
A partnership agreement should include the following things:
Outline the purpose of the partnership
Document each partner’s name, address, and other information
Write out ownership interest and partner shares in the company
Outline specific responsibilities, roles, and obligations of each partner
Note the liabilities of each partner
Consult a lawyer to ensure your partnership agreement covers all key points to protect both of you.
Make sure to be over-prepared for any situation that could possibly arise. Put in safeguards and make a plan on how you will go through the decision-making process. Having set guidelines that can be followed in every situation will help keep things consistent even in sticky situations.
Overall, embarking on a business partnership can be a great thing, just make sure the partnership is a good fit and needed protections are put in place.
