Choosing a suitable startup partner necessitates compatibility. It also necessitates the search for a partner whose abilities complement rather than duplicate your own.
While working with partners, there are many aspects to consider. Consider these problems when you look for business partners, and always get everything in writing
Expanding Your Knowledge
A relationship is a collaboration. While working as partners, you must be able to communicate well, trust each other, and respect each other.
You don’t want to date yourself, and you don’t want a business partner who has all the same abilities as you. Having a programming genius when you already are one will not provide you an advantage.
What talents do you lack? Locate a companion who has such abilities. Consider the overall picture, which includes funding, marketing, and employee relations. Working with partners should be advantageous.
Table of Contents
Signing a Partnership Contract
No matter how close you are, a handshake will not suffice in the business world. Make a written record of everything.
A business partnership outlines the parameters of doing business with others. It contains the following items:
Profit distribution
Work division Contribution amounts expected
Ownership stakes
Options for purchase
We provide complimentary paperwork to assist you in putting your cooperation in writing. If you’re starting a limited liability corporation, an LLC operating agreement will lay out each member’s financial rights and responsibilities. If not, establish a partnership agreement outlining how decisions will be made, how much each of you is expected to contribute, and how profits will be split.
Remember to include a buy-sell agreement. This agreement specifies what happens if a partner dies or quits the company. It prevents financial and tax issues that might arise if processes are not clearly defined when working with partners.
Creating Partner Responsibilities
The clearer you are in the start, the more likely your relationship will endure. Discuss each other’s obligations while working with partners. Make a list of who is accountable for what.
Establishing a firm might cause conflict amongst business partners. You will not always agree, just like in a relationship. While working with partners, divide the work ahead of time to maximize everyone’s skills. Include it in the LLC operating agreement or partnership agreement to make it clear who is liable for what.
Organizing a Business Meeting
A healthy relationship, like a marriage, is built on communication. Your company will suffer if you do not interact with your partners.
Speak or email about the positive and negative so that no one is surprised. Set up frequent meetings to discuss the company’s operations. Meetings are only as good as you make them. The more structured they are, the more productive they will be.
While planning a meeting, consider the following:
Choose the topics you will discuss.
Determine who will attend.
Set a time and location.
Make an agenda and prioritize any important topics.
Make a point of taking and distributing meeting minutes. To make things easier, we provide a corporate minutes document.
Being adaptable
Relationships alter, priorities vary, responsibilities expand, and expectations rise. All of these factors have an impact on the connection. Flexibility is required for success.
The same is true when collaborating with others. Re-evaluate the collaboration as you go to ensure that it is fair to all parties involved. Be open to switch roles and collaborate so that your skill sets continue to assist the company. Working with partners necessitates each partner’s willingness to adapt as the firm expands.
Developing an Exit Strategy
While working with partners, things don’t always go as planned. Do you have a strategy in place in case this occurs?
A buy-sell agreement, often known as a “business will” or “business prenupt,” specifies what happens if one of the company’s partners dies or departs. It provides provisions for death, disability, retirement, divorce, and firm transfers.
Clinical Assistant Professor Heather Harper of Chicago-Kent College of Law, who founded and leads the college’s Entrepreneurship Law Clinic, advises addressing what happens if a partner departs. She recommends include a stipulation in any agreement that requires each partner to be “vested,” or put in a particular amount of time or labor, before they can participate in the profits.
Harper suggests drafting a vesting agreement that allows the company to purchase back all or part of a co-unvested founder’s shares. This allows the leaving partner to retain the “earned” ownership stake, while the surviving partners may buy back the “unearned” shares at the purchase price or at fair market value.
A joint partnership or LLC operating agreement may also contain language addressing what happens if a partner departs the company.