Starting your next business and bringing on a new partner? Before you get started, here are a few things to consider when building a successful business partnership
Prepare: Get to know your future partner before you start your business. A business partnership is similar to a marriage. You will spend a lot of time with this person over the course of your business relationship. Thus, taking some time to do a little "get to know you due diligence" can go a long way!
Plan: Discuss with your partner how each person will exit the business. Whether it's selling, bringing on new members, closing down the business, leaving it to family members or some other exit strategy, at the outset of the business relationship, it's important to be informed about each partner's plan to exit. Once both partners are informed about the other's exit strategy, you can structure the business and the partnership relationship in a manner that aligns with each person's exit goals.
Structure: Select the business structure that best aligns with those exit strategies and the business' goals. Will this new opportunity be a short-term venture with your new partner? Are you looking to bring on international investors? Do you plan to bootstrap your business? Will you hire employees? These are just a few examples of initial questions to help determine the best business structure for your new venture. Be thoughtful and take time to meet with tax and legal professionals to ensure you pick the proper legal entity.
Document: Solidify your short and long-term business goals, operations and strategy in a formal agreement. It's essential to have an enforceable document to refer to when trying to respond to the myriad of issues that inevitability come with business ownership. Whether it's responding to new opportunities or an unfortunate disagreement among the partners, a well-drafted agreement will help to minimize the time it may take to respond to either scenario.