Sure, there are good reasons to partner in business. A business has more flexibility with more than one owner. Also, two or more partners can help accelerate a company’s growth.
But it can also be a hindrance, especially when there isn’t unanimity on business issues. If you find someone with whom to partner, it’s best to put an agreement in writing.
There are partnership options. General partnerships are operated by the partners. In general, a corporation or a limited liability company (LLC) is run by representative management – people who are either appointed or elected.
The majority partner is someone who owns more than 50 percent of the company. In the event of a dispute or disagreement, the majority partner rules.
Sometimes, grateful owners decide to give high-performing employees or trusted family members a minority stake in the company.
But I’ve seen cases where such decisions go awry when owners were too trusting and failed to see flaws in the employee or fail to take precautions to prevent embezzlements.
Not to over-simplify, before you create a partnership here are nine questions for which you need answers:
1. Are you thinking clearly?
Don’t make such a decision when you’re feeling lonely or under financial duress. Perhaps all you need are management strategies for a successful turnaround.
2. Do you understand your motives?
Know your business needs and those of the other person – really know the other person.
3. Do you have the right legal help?
Again, you must have a bullet-proof legal agreement. a good tax accountant or CPA, insurance agent and an attorney.
Their talents and skill levels are crucial for your success. Before forming a partnership, you must have the right attorney.
4. Will the prospective owner pay for the privilege?
I’ve had hardworking and highly educated people want to become a partner in my established business. Even if I had been convinced to accept their proposals, they weren’t able or willing to pay for their equity.
The majority partner is someone who owns more than 50 percent of the company. In the event of a dispute or disagreement, the majority partner rules.
5. Do you need a partner to succeed?
You must decide if another person will complement you well because they have skills you need for success.
6. Does the person have a strong drive, integrity, skills, health and same approach about money matters?
Too often, prospective partners fall short of the mark in these qualities.
7. Is the person otherwise compatible with you?
Opposites attract, which isn’t necessarily bad. An entrepreneurial life can be a roller coaster in emotions. You have to know if you can work with the other person in all situations.
8. What would be the exit strategies?
Decide what will happen if you or the other person decides to quit the business or if you decide to sell the company.
9. Is the prospective partner a friend of yours?
Just as it isn’t a good practice to hire friends, that’s also true about partnering with friends. Be careful to keep your objectivity.
From the Coach’s Corner, here are some related resource links:
Partnerships — 7 Steps to Avoid Fights over Money — When a business has cash flow issues, a key issue that comes up every day is money. As a partnership, you have a shared responsibility to discuss issues on principles without arguing in an ad hominem manner. Your company is doomed if you ever attack your partner’s character or sarcastically belittle the person’s traits. It’s an unproductive way to try to undermine your partner’s argument. Neither party wins. Whenever there are arguments, it’s important both persons clean off their street. No person is always 100 percent right.
5 Reasons for a Strategic Plan and its 6 Key Elements — Are you ready to compete? Is your company like many that need to rethink their strategic plans? There are five reasons to create strategic plan. It has at least six components. Cash flow for companies is a common problem. Some businesses have grown too fast. Others have fallen short in due diligence. Many failed to plan for a roller coaster ride. Here are the strategic planning tips that work for nonprofits and businesses.
12 Tips for Profits to Keep Your Business Dreams Alive — Most businesspeople agree the economy continues to be challenging. Signs of a lingering downturn are everywhere. Business activity is slow. Governments at all levels report low tax revenue and are restructuring, and not spending. On top of it all, customers want you to cut prices. With a high level of oversupply in many industries, high unemployment and reduced customer spending, many businesspeople face a highly competitive environment.
15 Quick Tips for Profitability in the New Economy — First, it’s important to accept the facts. The new economy – challenging times – is here to stay. A business should perform like a championship sports team. That means protecting your turf while aggressively pursuing new opportunities, and making full use of technology. For new or existing businesses, here’s a checklist of strategies.
Profit Drivers – How and Why to Partner with Your Employees — If you want maximum profit, consider partnering with your employees. “Key employees – in fact, all employees – will be more valuable to a company if they understand what drives profit and improves cash flow for the business,” says leading financial consultant Roni Fischer. Ms. Fischer explains typical obstacles to profit
“People that pay for things never complain. It’s the guy you give something to that you can’t please.”
-Will Rogers
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