There are many business partners out there who are completely oblivious to their partner’s background before they started a business together. As a matter of fact, many are oblivious to their business partner’s personal life even while they are running their business. Many are clueless as to their business partner’s vision for the company or dreams for the future as well.
This poses a huge issue as there are a variety of issues that you want to consider before going into business with anyone as a partner. The following are some of those things you will want to consider:
- Vet anyone you are going into business with. Know their backgrounds and their previous deals in order to help ensure they are someone “Safe” to go into business with. Minimizing your own risk will be up to you.
- You can address issues before they become real “issues” if you talk them out it can help avoid business disasters in the future. It will help you protect your money and investments in the business (time, money, effort, energy, etc.) as well.
- When you sign documents with the person you are going into business with you should talk about them together. Understand what you are both agreeing to and signing to. Make sure it’s an agreement you can live with.
- Consider using separate legal teams from those your business partner uses. This will pose less of a threat or a concern if you have to use that team at any time. They represent your unique interests alone, not those of more than one person in the same business.
- If your community is a “community property state” have your spouse put on all of the paperwork for your part of the business. In the case of a divorce this will protect you as your spouse will presumably have interest in any property or other assets you own while married.
Setting Up a Business Partnership
You have to set up a partnership and a structured entity that will work for both of you. Understanding the mechanics of how your partnership is set up and how the business will work is key before diving into the program. No partnership is guaranteed, but knowing who you are working with and what you are getting into can help both of you work out issues that may arise more easily.
The following are some of the factors to consider when you want to take to create a solid, two-way business relationship where all business partners are valued equally:
- Partner roles in signing and authenticating documents and other choices related to the business.
- Understand the duties and responsibilities of each business partner and hold them accountable to performing them.
- Contributions of financial investments that have been made and continue to be made by each partner.
- Distributions of profits, compensations, and losses of each business partner according to the officially filed documents the business has filed.
- Vote requirements for each choice that comes across the company.
- The strategy that will be implemented if the business is dissolved or sold.
- A buy-sell provision if the company’s partners decide to separate or someone decides to exit the business.
- A carefully crafted expulsion policy of what a business partner has to do to be asked to leave the business and any remunerations that go along with it.
- A non-compete provision.
- Other provisions that may relate to the business and not be covered in the aforementioned.
Sitting down and discussing these scenarios can help protect the interests of all partners who have a stake in the business and in the interest of it doing well.
The Best Entity of Joint Partnerships
If you are looking to protect your business in the best possible way, consider running a limited liability company (LLC) which will help protect you from the acts of partners in the business and preserve your stake in the company better than almost any model available.
Now that you have a clue as to what to look for in your partners when you are running a business please feel free to contact us at 5 Star Funding for more information or assistance with setting up a business partnership you and the rest of your partners are comfortable with.