Congratulations, you’ve started your own company! The ability to become your own boss and take control of your professional and financial future is unique and should not be taken for granted. The inclusion of partners can make the experience more satisfying because you have people sharing a common goal to support and work alongside you as you grow your business.
While added partners can bring added success, it is important, however, to have a detailed partnership agreement in place that sets out the terms of the partnership. Here are a few tips on how to create a professional working relationship that benefits you and your company.
1. Keep it professional
The media and entertainment industry often romanticize the relationships between business partners, chronicling best friends or family members’ journey from a two-person startup to a fortune 500 company, all while maintaining a close and fun relationship. While friends and family members can certainly run a successful business together, you do not want to find yourself in a situation where personal issues and emotions make it difficult for you to make business decisions, as separating business from personal matters is often very difficult.
If you go into business with a close friend or family member, it is even more important to have a solid partnership agreement. The agreement will be important and helpful in resolving conflicts, in detailing how the business will be managed, and in allocating profits and losses. It is important to establish boundaries between your personal relationship and working relationship, and having a partnership agreement will help you to do just that.
2. Talk it out (beforehand)
While it is not possible to plan for every situation imaginable, business partners can prepare for most circumstances by talking about how they would like to handle certain circumstances and memorializing their plans and agreements into a partnership agreement. You planned for the marriage and the honeymoon- you should also plan for the divorce. Establish what you will do in case there is sickness, conflict, major life events, opportunities and setbacks. You will want to leave no stone unturned to avoid having to scramble and negotiate for solutions last minute. The partnership agreement should document the outcomes of these conversations and layout an action plan for various scenarios.
3. Establish duties for each partner
The partnership agreement should be very clear about roles and responsibilities. You want to reduce the potential for conflict and stress by establishing who will be doing what for the company. For example, the partnership agreement should delegate responsibilities development, strategy, communications, IT, etc.. Once it is clear who will focus on certain aspects of the business, each partner should adhere to the established boundaries.
4. Consult a third party
When serious conflicts arise, you may want to consult a third-party consultant, a mediator or an attorney to bring an unbiased opinion into the mix. The partnership agreement should address when outside resources should be brought in to reduce internal conflict.
5. Have an exit strategy
Have a plan in place in the event that a partner wants to leave the company, passes away, or faces life events, such as divorce or bankruptcy, that could negatively impact the company. Include these provisions in the partnership agreement from the beginning. It is also important to consider what will happen to the business in case of a merger or acquisition, buy out, or simply selling to another entrepreneur. Determine how assets will be liquidated or ownership will be transferred if it becomes necessary to wind down the business.
Starting a business or adding a new partner? The Monroe, NC business attorneys at Perry, Bundy, Plyler and Long LLP can help draft and negotiate a partnership agreement that benefits both the partners and and the business alike. Give us a call at 704-289-2519 to schedule an appointment with one of our attorneys.