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What to consider before forming a partnership

On Behalf of | Jul 16, 2022 | Business Formation

If you want to start a business, you may be considering taking on a partner. There are many benefits of having a partner, especially if this is your first business endeavor, but you should think it through before making a decision.

One of the most important things is to choose the right partner. It is also important to write up a partnership agreement, as this will help prevent and minimize conflicts.

Keys to a successful partnership

Entrepreneur discusses some of the important aspects of forming a good partnership. One is that you trust the person. It also helps if the partner brings skills or experience to the business that you do not have. In fact, some of the best partnerships consist of two people who have completely different skill sets. This allows each partner to focus on their strengths to make the business the best it can be.

You should both share similar values and goals for the business, as this will help focus intentions during challenging times. You also should not rush into a partnership. Successful entrepreneurs recommend knowing the person for at least one year so you can see who they really are.

The importance of a partnership agreement

The U.S. Chamber of Commerce outlines the importance of having an agreement and what you should include in one. Some of the important clauses include:

  • Vision, mission and goals of the business
  • Clearly defined roles of each partner
  • Partnership contributions and ownership percentages
  • Profit and loss division
  • Plan for partner withdrawal or business dissolution
  • Preferred method for resolving potential conflicts or disputes

The more detailed the agreement, the better. This minimizes any confusion or lack of clarity along the way.