This morning I was asked if forming a business partnership is the right move when a small business owner doesn’t bring all the necessary skills to the table. I’m always a bit nervous about partnerships, so I used my standby response…
The leading cause of divorce is money. With business, you don’t even have love to keep you together.
I quickly finished my response to the client and then popped open my spankin’ new blog* with the prospects of writing my first official post. The problem is, I didn’t know if I’m actually right about causes of divorce. Conventional wisdom seems to agree with me, but now that I’m a faux journalist, I should probably find a credible source… Shouldn’t I?
A quick trip to Google brought me to an article by Liz Pulliam Weston titled “Money isn’t the culprit in most divorces.”
The title of the article does seem to indicate I’m wrong. However, the body presents a valid argument showing that I’m not that far off the mark. So while I don’t have a straight answer about money being the root of all evil it does give me cause to modify my thinking and the way I’ll format this portion of future SCORE counseling sessions.
So if the question is, “Is a partnership right for my business?”
My answer will be, It depends.
While you might be friendly towards one another, have complementary skills and a little bit of money to bring to the table, you need to be very cautious. Becoming business partners is equivalent to marrying someone.
- You will spend more of your time with the partner than you will with your spouse.
- You will be splitting any money you do make with the partner.
- If the relationship goes bad, they can walk away with a significant portion of your business — maybe enough to cause the business to fail.
If you still think a partnership is right for your business, you shouldn’t do anything until you have a signed partnership agreement. I really mean that. Until such time as you have an agreement in place, if they’re working in the business you have an employee. If they give money to the business then they are an investor.
The partnership agreement should be reviewed by your attorney and should cover everything you can think of.
- Who owns what share of the business?
- Where do your shares pass should something happen to you? Accidents have been known to happen. If something does, do your shares transfer to your next of kin or the partner?
- How do you get out of the business or remove a partner? Situations change, so be flexible.
- What jobs will each of you be responsible for? Be thinking about “Too many cooks spoiling the broth” vs. “Many hands make light work.”
*Editors note 1-24-10, This article was imported from karlierobinson.blogspot.com a general topics blog and KarlieRobinson.com is the new “new blog” devoted to business topics.