A business partnership is one of the best-known and most common forms for a new business to take. Two or more individuals with a similar idea may decide to share the responsibilities that come with owning and operating a business.
A partnership can be a beneficial business structure, as it does not involve the same requirements as more complex structures while leaving you less vulnerable than a sole proprietorship. However, the success of your business is dependent on your relationship with the other partner.
What you include partnership agreement could have a major impact on your financial future. What issues do you need to address if you want to start a new partnership?
What happens if the business fails?
On certain liabilities and will make investments in the company. However, especially if one partner has made a disproportionate financial investment in the business, you may need to very carefully think about what happens if the business fails. If you have to close the company down and liquidate assets, it’s important that both of you already agree about how to handle that process.
What happens if the business succeeds?
A business doing far better than either partner expected is as big of a problem as a business failing. It can be hard to scale up operations or for business partners to split the responsibilities that increase with business success.
At what point would you bring on other executives or more investors? When might you consider selling the company? You need to both agree about what happens if the business is a runaway success now so that you can continue working well together when your business thrives.
What happens if something happens to one of you?
All kinds of issues could affect your partnership. One of you could get into a car accident and suffered a traumatic brain injury or have a stroke and die. You need to have rules in place for both the incapacitation of either partner or an unexpected death.
Addressing business succession and other issues that may arise with an incapacitated or deceased partner now will protect the business and the investment partner makes in it.
Proactively addressing your needs as you start your company will help set you, your partner and your business up for future success.
