Legal Matters - Corporate Law
Thinking of Taking on a Business Partner?
There are many benefits to having a business partner whether as partners of a partnership or as shareholders of a small business corporation. The benefits include, among others, having a partner who possesses complementary skills which are necessary for operating the business, obtaining much needed capital to finance the business, and leveraging the relationships and connections of your partner to further the interests of the business. Unfortunately, many new business start-ups fail within the first five years. In my law practice, I often hear from clients after it’s too late, that is, after the relationship has deteriorated to the point where the partners are looking to go their separate ways. In many cases, it’s not that the business was unprofitable or had no potential, but rather the partnership failed due to differences in expectations. Here are few tips which may help you when taking on a business partner:
- Be sure to clearly define each partner’s roles and responsibilities.
- Be sure to understand each other’s expectations – it is important to have a shared vision of how the business will grow, what the long-term goals will be, and to understand how much time and attention is expected of each partner.
- Be sure to put it in writing - A comprehensive partnership agreement (or shareholders agreement if you are incorporated) should not only detail roles and responsibilities, but address how future capital will be raised, how decisions will be made and what happens if there is a difference of opinion, what happens when a partner wishes to leave or is forced to withdraw, and how new partners will be admitted, among other provisions.