Are you starting a business with a friend or former office mate? Partnering with someone you know can be a great way to launch a business, but mixing business with family and friends can also be tricky. Here’s what you need to know to protect the business from potential landmines down the road.
When partnering with a longtime friend, colleague, or family member, you may be tempted to seal the deal with a handshake or over drinks. After all, if you’ve known each other for years and you both clearly want your business to succeed, what’s the point of wasting time with all the formalities and paperwork?
Problem is—issues are bound to arise in any business arrangement. Maybe you’ll disagree over how to spend your marketing budget; maybe your partner’s personal situation will change and he or she will need to return to an office job. If you haven’t agreed upfront to how some of these important decisions will be made, you can end up in a very difficult position.
This is where a partnership agreement comes in. It’s a document that captures what you and your partner agree to before going into business together. Creating one is a smart idea for any partnership situation, whether you’ve known your partner for ten years or ten hours.
A starting partnership agreement doesn’t have to be a fancy document, so long as it puts some of your early discussions in writing so you can refer to them down the road if needed. Here are some of the things you should discuss upfront:
Define who contributes what
It’s important to spell out who will be bringing what to the table. This means discussing everyone’s contributions in terms of:
- Working hours and commitment: who’s planning on working full-time, who’s working part-time and managing other commitments?
- Cash: how much is everyone contributing in terms of cash?
- Other investments: what other things are people investing? For example, are you going to be using one partner’s garage for storage space or your spare bedroom for the working office?
- Customer list: is anyone bringing their former clients over to the new business?
By discussing all these investments, no matter how minor, from the start, you can make sure that everyone feels like their contributions are valued and recognized.
Define who gets paid what
You’ll need to explicitly define how everyone will get paid. Will each partner be given a salary for their role in the business? Will you be paid based on your particular client projects? What if your business makes extra profits for the year, how will they be distributed? If each partner owns half of the business, will the extra profits automatically be divided 50-50 or will the distribution be based on the work each person did that year?
Money isn’t always the easiest thing to talk about, and close partners will inevitably have different financial situations, needs, and ideas on how everyone should be paid. That’s why it’s so important to discuss money matters upfront and specify them in the partner agreement. In addition, you may want to write in that the agreement should be reviewed and revised (if needed) on an annual or bi-annual schedule.
Determine how decisions will be made
All too often, decision-making and authority issues end up causing more partner disagreements than money. People usually become entrepreneurs and seek out self-employment in order to have more autonomy. When you’re starting your own business, it’s only natural that you want to have a say in everything.
Talk about what kind of decisions need a unanimous vote and what are the types of day-to-day decisions that can be made by a single partner. Who’s able to make what decision? For example, do you need your partner’s approval to buy a new computer or an online advertising campaign? There’s no single right model that’s going to work for every partner relationship. Try to anticipate as many scenarios as possible beforehand and determine what decision-making structure will be the most effective for your business and everyone involved.
Discuss how you can terminate the agreement/business
When you’re just starting out, the thought of walking away from the business is probably furthest from your mind. However, circumstances and plans easily change from year to year and it’s wise to discuss these situations ahead of time. What will happen to the business if one partner decides they want to leave? Can the other member(s) buy out that partner’s interest? Do you close the business? And if so, what happens to the trademarks, intellectual property, customer/client lists, and physical assets?
As with any legal or business formality, it’s always best to invest some time upfront getting things squared away, rather than waiting until something happens and you wish you had things in writing.
Don’t worry about dampening the excitement of launching a business with potentially awkward conversations (aka what to do if someone gets ill). These conversations will be a good testing ground to make sure the partnership relationship is strong enough to weather the day-to-day realities of running a business.
Zodiac Signs do help understanding the compatibility factor
Taurus and Scorpio
Another lovely earth and water combination. This combo has what it takes to be free while still going places. Love and passion abound!
Scorpio and Cancer
These two are pretty passionate. Their deep bond is strong and their love of intimacy is mutual. The two are both a bit protective, so they make one another feel secure in every kind of way.
Pisces and Scorpio
If nothing else, the two can get it on and it’s unlike anything either have had with other signs.
Pisces and Taurus
Earth and water spend a lot of time together as it is, so this match is made in the elements. Taurus is practical to a fault so Pisces’ gentle, emotionally deep approach can help Taurus expand his/her horizons. In return, Taurus offers structure and direction to the dreamy, sensitive. Pisces.
Libra and Aries
These two are both social butterflies, which makes them strong and happy together. If you’ve ever been to a great party, chances are this pair had something to do with it – Organizing, Planning or Executing !
6. Aries and Gemini
These signs are a great match both physically and intellectually. Their elements, fire and air, need each other and can work well together on a common goal.
Sagittarius and Leo
These fire signs are super adventurous and when they’re put together, they just can’t stop getting up and going.
Virgo and Aquarius
Opposite attract here and it’s bliss when it happens. Virgo is theoretical and analytical while Aquarius is emotional and fun-loving. The two keep each other on track without the expectation that one will change for the other.
Capricorn and Taurus
This pair is a powerhouse of productivity. They say “be a boss, date a boss, build an empire” and this combo is the most likely to live it than any other zodiac couple.
Gemini and Virgo
This is an intellectual combination. They can debate and discuss ’til the cows come home and find themselves deeply appreciated and validated in this.
Aries and Capricorn
Take two sign both passionate and practical, and you have a winning combination. All the Capricorn rule-making and structure mixed with Aries’ heated passion makes for the kind of organization everyone wants.
Gemini and Libra
Wit and charm, people. This is another intellectual match that just works. The twins are neutral and indecisive while Libra, the scale, is also neutral but can call the shots. It works quite well when these two strike the right positive cord.
Aries and Sagittarius
Tons of energy in this zodiac to go around. These two fire signs have a habit of igniting one another’s passions both in their professional and personal life.
Pisces and Cancer
This is passion and a real one too. The passion can work in towards any goal effortlessly.
15. Virgo and Taurus
Hold on and don’t let go is the motto that rules these two and will make for a persistent long partnership if any.