When you meet someone who has similar values and ideas to your own and who has complementary assets, the idea of going into business together can be an exciting prospect. Whether they have industry connections that can help you get a business off the ground, scientific expertise or financial resources, this other person could become your business partner.
The relationship you have with a business partner can be a positive and productive one, but it can also have negative consequences for the company you start if you don’t plan for the future. Even if you both currently agree about the long-term plan for the business and your involvement in it, things could change in the future.
Before you formally start your business together, you and your potential partner need to have a serious conversation.
You can put rules in place for the end of your partnership now
When an engaged couple works together to set terms for the potential future end of their relationship before marriage, the prenuptial agreement that they sign will guide them if they ever get a divorce and help keep things civil and straightforward at the end of their relationship.
A business partnership can last a lifetime, just like a marriage, and can have significant financial implications for both individuals involved, just like a marriage. Creating a contract that is similar to a prenuptial agreement with your business partner can be a very wise decision that sets you up for success.
Decide now, while your relationship is on its best terms, what the two of you think would be a fair way for you to split up the partnership and the assets you invest in the business later if things change. Agreeing to compensate someone for their initial investments, planning for the growth of the company and discussing arrangements for buying each other out are all smart inclusions in a contract between business partners.
An agreement can help you clarify your rules and expectations for each other
Having to create a contract can mean that you have to talk in-depth about what you expect to do, what you expect them to do and what you think both of you will get out of the partnership in the long term.
Clarifying expectations now can go a long way toward reducing potential partnership conflicts in the future. It can also help you address issues that arise in the future if you have certain obligations detailed in your contract. Being proactive about outlining your expectations and obligations in the partnership, as well as how to handle its dissolution, can set you and your partner up for success as you plan a new business strategy.