Your business partner is an integral part of the success or failure of your business. The right partner can complement your strengths, reduce your weaknesses and give you the kind of perspective that helps build a strong business model and carry out your plans. The trick is to make sure that a business partner is right for you.
In 2013, Entrepreneur magazine listed key questions to ask before committing to a business partner. You should find out information such as:
- Your partner's skills and attributes. Ask yourself what the partner brings to the table. You may want someone with complementary - but not similar - skills and personality traits.
- Your potential partner's financial status. Someone with large outstanding debts may not be able to get by on the lower salaries that often accompany new ventures, for example.
- Your partner's family life. A partner who is having a child, is caring for an elderly parent or has another significant family commitment may not have time to devote to a business. Similarly, a partner whose family does not support the venture may also be a red flag.
- Time commitments. How much time is your partner willing to commit to the business?
- How does your partner handle difficult situations? Find out how your partner has handled challenges in past business situations.
In short, a business partner should be someone you trust and know you can work with. Make sure you are comfortable with your partner now to prevent surprises later. This may involve research beyond asking questions of a potential partner.
Thoroughly researching a partner is so important that our law firm has conducted background checks as a service for businesses that are considering adding partners.
Making sure your partner has the right background and personal characteristics is one part of the process. The second is setting your business partnership up for success. Our firm recommends that potential clients define their business goals upfront and create structures that support those goals.
A business may become incredibly successful with partners who work well together, but the partnership may become strained when one wants to leave or when an event happens that changes the business. For example, we handled a case involving a business run by two partners. The business had been thriving - until another company offered to buy the company out. One partner wanted to sell, but the other did not. What then?
Without an exit strategy, these disputes can result in hard feelings, lengthy litigation and prevent the business from moving forward. With proper planning, these problems can be handled before they become intractable.
One part of properly setting your business up for success as well as preparing for potential partnership terminations is procuring an attorney to draft formal business paperwork. This includes:
- Corporation bylaws,
- Partnership agreements,
- Shareholder agreements,
- Member agreements,
- Company agreements,
- Non-compete agreements and
- Corporate control agreements.
Our law firm handles formation, planning and restructuring for large and small businesses throughout Texas. To learn more about our practice, visit our page on formation and planning.