Troubleshooting Legal Problems

3 ways to protect yourself when taking on a business partner

A business partner can help your idea become a reality and decrease how much risk you take when starting a company. However, your partner can also be a big source of risk, as issues between the two of you could ultimately destroy the business you attempt to build together.

One of the first steps will be negotiating terms for a partnership agreement. The three inclusions below will help you better protect yourself and the company that you hope to build.

A detailed explanation of your contributions

If you intend to provide financial support for the business, you need to clarify exactly how much you will invest and the timeline for such investments. If you intend to provide experience and a customer list as you start establishing your company, then you need to make it clear that you will not have an upfront financial contribution to the organization.

When you clarify what you will do and what the other party will do, you avoid the challenges created by unmet expectations.

Clear goals for the company/partnership

Do you want to reach a certain financial benchmark and then sell the business? Do you hope to reach a point where you can open additional facilities?

Nothing sabotages a partnership more quickly than differing objectives. Partners clarifying their short-term and five-year goals for the company now will help guarantee that you both want the same thing.

Rules for ending the contract

Whether you want to dissolve the business or buy out your partner, you will need to have contractual instructions in place explaining the best way to end your partnership. That way, your agreement will govern what happens at the end of your relationship, rather than the two of you leaving everything to chance.

Including all of the most important terms in your partnership agreement will make starting a business less risky.