Proud partners - protecting partnerships

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Entrepreneurs tend to begin their road to small business alone - a sole proprietor structure limits the accountability and makes the tough decision making just a tad easier. After all, it is their headstrong egoism that has driven them to get this far and battling another like-minded partner can mean rough seas for a start-up.

 

At a certain point in the development, partnerships become a valuable consideration. Partnerships can create more freedom and provide the potential for garnering higher profits. They can also be potentially volatile. Before considering foraging a partnership ask the following questions:

  1. Do you have the same goals - both short and long term? Is your vision the same? Without the same end game, the partnership is destined for disaster.

  2. What are the responsibilities of each partner? What are the roles? Clearly define these before entering into any formal agreements.

  3. How will you determine percentage of ownership? 50-50 seems logical, but is not advisable.

A successful business depends on decision making and that's not always possible when key stakeholders have equal say. A 49%-51% is about the best that can work for a business but if that's not possible consider creating a board to settle disagreements.

 

Once the guidelines are decided, form a binding agreement. A solid contract clarifies the relationship when questions are raised. The US-based Small Business Association recommends the partnership agreement should include:

  1. Equity invested by each partner
  2. Type of business
  3. How profits and loss will be shared
  4. Partners pay and compensation
  5. How assets will be divided in case of dissolution
  6. Guidelines for changes or termination of partnership
  7. Clause for dispute settlement
  8. Guidelines in case of death or incapacitation
  9. Restrictions of authority and expenditures
  10. Length of the partnership

With these ten factors reduced to writing, each partner can focus on achieving the agreed vision and not be distracted by internal disagreements.

 

Contact us

Email results@businessacademy.nz

 

Skype PhilANZ

 

Phone 04 920 0911

 

P.O. Box 30-545, Lower Hutt 5040

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