Building a Successful Partnership

Entering into a business partnership requires more than just sharing good ideas. For the partnership to succeed, partners must collaborate on decisions about the business's structure, financing, and conflict resolution.

On the Same Page?

Initially, you and your partner should discuss your visions for the business. This might include a timeline for growth and potential changes in the business over time. Shifting goals and priorities could require restructuring responsibilities and compensation later on.

Where Will the Money Come From?

Partners should talk about funding sources for the business and strategies for raising money in the future. While taking out a business loan might be a good option, both partners need to agree on it. Sometimes, one partner might have the personal resources to loan money to the business. Partners should agree on the terms and create a repayment plan.

Choosing a Business Structure

Review the potential options for structuring your business. An LLC, S corporation, and C corporation each have their own advantages and disadvantages. Your tax and legal professionals can help you choose the best business structure for your specific situation. Also, consider whether your business will be structured so that partners share expenses equally and profits are divided based on each partner's contributions.

What if Partners Disagree?

Differences of opinion are inevitable, so having a plan to resolve disagreements is helpful. You might choose to appoint one partner to make the final decision or let each partner have the final say in their area of expertise, then come together to decide on all major financial decisions.

Make Sure You're Covered

Partners should obtain an umbrella insurance policy that provides liability, property, and casualty coverage. Coverage for errors and omissions also protects you from claims of mistakes in professional services. Key person life insurance is typically purchased on the life of the owner(s) or another essential employee. The company is the beneficiary and uses the proceeds to cover the costs of hiring and training a replacement for the deceased person or to pay off debts and close the business.