What makes a good business partnership? A strong working relationship and trust are the foundation of any successful partnership. But a business’ staying power needs more, especially clearly-defined roles, rights, and obligations of the partners.
Going into business with someone without these in writing is a recipe for misunderstanding and, ultimately, resentment. When things devolve to that point, businesses implode and partners lawyer up.
Although every situation is different, business partners should keep in mind the following points to achieve a successful, long-lasting business partnership:
Discuss business goals: It may sound obvious, but it is imperative that individuals entering into a business partnership have the same vision for the business. Any discrepancies in that vision should be addressed at an early stage. If one partner is a risk taker and the other is especially risk averse, they may be fundamentally incompatible.
Define each partner’s responsibilities: A business is most efficient when each partner understands his or her responsibilities and obligations. While some overlap is natural, it is best to avoid doubling up on responsibilities to ensure that the business operates as efficiently as possible. Who will lead the sales and marketing and who will handle the back office functions, such as compliance and order fulfillment?
Draft a solid partnership agreement: All too often, partners find out the hard way that their contracts are vague and ambiguous. Some startups take unwise shortcuts and borrow from other agreements or use online forms not tailored to their business. It is advisable to work with a business attorney to draft a partnership agreement that addresses all important aspects of the business: decision-making responsibilities, capital contribution, salary, beneficiary information, conflict resolution, dissolution, and many more. An attorney can represent the partnership, but each partner should consider having separate representation in some situations, such as reviewing these formation documents.
Consult a business attorney: An experienced business attorney understands the principles of business law and potential pitfalls. The right attorney can address all aspects of the business operation: choosing the right business entity, employment contracts, intellectual property protection, business transactions, and much more.
Because no two businesses are the same, it is important to work with an attorney who will take a customized approach when helping you set up your business partnership.