Having a business partner can go a long way toward productive time management, effective creative processes and necessary funding. While adding a partner within your business may seem like a great idea, there are a few things you should consider before taking the leap.
The Trust Factor
Before you start a partnership within your business, make sure you are entering a contract and commitment with someone you trust. You should vet every single person you deal with in your business no matter how well you think you know them. Call personal references and do a background check before you fill out a federal tax ID application together.
Address Issues Up Front
No one gets along always, and you are likely to have issues with your partner. Before you add them to your LLC tax form, address any potential issues you see being a problem. Discuss worst-case scenarios and how you would handle them. If your partner is uncomfortable dealing with these situations, you may want to rethink your commitment.
Another thing to address from the beginning is what contributions each partner is expected to make. Contributions could be made in the form of money, assets and time each partner gives. Discuss more than the initial contributions; also consider future contributions to the business.
Create an Exit Strategy
If one partner determines that he or she wants to leave the agreement, the terms should be laid out from the beginning. Discuss an exit strategy and put it in writing to determine how the partnership will be dissolved if necessary.
If the partnership is dissolved, do you have a noncompete provision that stops you and your partner from opening a competing business immediately after? These are important questions to answer before the partnership is started.
The best structure to include a partner is a limited liability company, or LLC. Gov Doc Filing can answer any questions you have about how to set up an LLC and how to structure things with a partner.