Rport2011

Points to Consider in a Small Business Partnership

Before you enter into a small business partnership, you need to consider where misunderstandings and disagreements may arise in the future. In order to minimize this possibility and to provide for structure in the event it occurs, you should consider these 10 points:

1. What type of business are you going to have? This includes not only the original idea, but the potential side marketing that you could do. For example, if you’re opening a sporting goods store, will you also provide things such as golf lessons or triathlon training to your customers? Know this in advance in order to avoid disagreements later.

2. What will your business structure be? Are you going to have a general or a limited partnership? If a limited, who will be the general partner(s) and what will the business form be for that person or entity? Everyone should have a solid understanding of the extent that they will be liable for business obligations prior to entering into any small business partnership agreement.

3. What will be the initial contribution of each partner? Here, you’re not only considering cash, but also expertise. If one partner’s main contribution is not money, but their knowledge, this should be understood and spelled out.

4. How will disputes be settled? In the unfortunate event you and your partner(s) do not agree, how will the matter be decided? Does one person hold the final say, or is it by vote (if more than 2?) Don't get yourself--or your business--in the situation where you are unable to move forward because partners can't agree.

5. How will the profits and losses be shared? Will it be by shares in the company, or some other method? What about rolling profits back into the business to expand? You should consider, now, how this will be determined.

6. What will each partners pay and/or compensation be? This is not exactly the same as profits. The difference is that pay is a set...