A Recipe for Trouble: Partnerships

Lots of people that get into business do so with at least one other person. Maybe that person provides money, maybe they have the technology or brain-power that you need, or maybe they are in it hook-line-and-sinker with you. Whatever the relationship, you need to be sure that both you and anyone that is involved know the expectations as well as the rewards. The more personal the relationship, the easier it is to put blinders on when it comes to the necessity of putting together a formal agreement.

There is an old saying, “Never get involved in a business venture with anyone that has less to lose than you do.” Before you enter into a partnership with anyone, you need to ask yourself several questions. Are you willing to give up at least partial control of your business? Is this person someone you want to work with (if they are going to take an active role)? Are you in agreement with fundamental questions such as the amount of risk you are willing to take and the goals for the business? If the answer to any of these questions is “no,” you might consider entering into an agreement of some type that doesn’t involve the other person taking an active role.

We all know that life would be much easier if we could just trust people. Unfortunately, too many times differing expectations, financial disagreements, and differing tolerance to risk can destroy even the strongest of relationships. For that reason, it is well worth you time to protect yourself, your business, and everyone involved by getting everything in writing. After all, you don’t want your life-long friendship or your new found friendship to end with the least bad feelings and the most a court of law (and lots of legal bills). You are much better off spending a little on legal fees and making a legally binding agreement. Work with the attorney to make sure you have covered all the bases. Encourage your business partner(s) to use their own attorneys to look over the agreement. People who are just investors are generally not looking for a hands on relationship with your business, so usually they only require some agreement concerning profits when and if your company becomes profitable.

Money may be tight at the beginning of your business, but using an attorney for a small amount of time and money can save you huge amounts of money and heartache later. You can even consider using some alternatives such as Legalzoom or Prepaid Legal which may be less costly. Don’t put your business or your relationships at risk. Put it in writing.