Starting a Business with a Partner

The business litigation attorneys at the Law Offices of Douglas T. Sachse explain what business owners should know when forming a business with a partner.

When you’re making the decision to embark on a new business venture, many questions immediately surface. What product or service will we provide? What market will the business serve? Where should our storefront be located, or will there even be a storefront? The list goes on. However, among the most important decisions, and one to address sooner rather than later, is whether or not you’ll operate with a partner.

Before getting into the details of bringing a partner on board, ask yourself, “Is having a business partner essential for the success of the business?” Some businesses will benefit from the expertise, contacts or financial resources of another principal to complement your own skill set, and some will not.  If the answer to this question is “yes,” and you’ve made sure your potential partner is the right person for the job, then the next step is putting the partnership in writing.

Even if your business partner is a former colleague, a close friend or a relative, you’ll want to draft a partnership agreement with guidance from a business litigation attorney. Many partners make the mistake of believing that there aren’t any obstacles, no matter how small or large, that could break the verbal agreements they’ve made with each other. However, just like a marriage, partners in business often wind up terminating their union in a bitter divorce. Consequently, it’s important to have a formal agreement in place so there are no questions about how sensitive or difficult situations regarding the business will be handled. The document also provides structure for the relationship between partners in a way that best suits the business.

In preparation for creating the partnership agreement, you’ll want to brainstorm suggestions for compensation, exit clauses, roles and duties. This includes information about who owns what percentage of the business, who is investing what, where the money is coming from, and when and how partners will be paid. The agreement should also outline expectations for each partner’s role in operating and managing the business, and should cover how each partner plans to leave the business if necessary. The very process of hashing these topics out with your potential partner will help to unveil any misunderstandings.

Your attorney will cover these subjects in greater detail and help to filter out anything trivial, but it’s beneficial to get a head start by having a course of action in mind. Taking the necessary steps in the beginning stages of your new business adventure will not only protect you and your partner, but also the business itself, from any unexpected developments down the road.

For more information about the process of starting a business with a partner, please contact the business litigation attorneys at the Law Offices of Douglas T. Sachse.

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