Business partnerships may start out on the most promising of terms, but often sour as the honeymoon phase ends and reality sets in. If you are thinking about going into business with a partner, keeping a few tips in mind can help you build a thriving business while avoiding some common pitfalls partnerships often fall prey to.
Make sure your end goals align
Do you dream of turning your business into the next multi-national sensation, or are you looking for a comfortable sideline that brings in some extra money but still allows you plenty of free time? There is no wrong answer, but whatever your end goals are for your business, they should be the same as your partners’ goals.
Clearly outline roles and responsibilities
When your business is up and running is not the time to decide specifics on who does what. You and your partner should clearly outline roles and responsibilities early on in the process. Failing to do so can result in disputes if one partner feels they are doing more than their fair share, or expectations did not align.
Know your strengths
Assigning responsibilities is easier when you know each partner’s area of expertise. Is one business partner tech-savvy while the other is great at dealing with people? Drawing upon individual strengths allows you to tap into the full potential of a partnership. If you are very similar to your would-be partner and excel at the same things, it might be a better idea to just go into business for yourself.
Select the right legal entity
Are you establishing your business as a general partnership, limited liability partnership or some other entity such as an S-corp or C-corp? The entity you select will influence your business for its entire life, affecting factors such as how you take profits, how you are taxed and the amount of personal liability each partner will incur. By making informed legal decisions at the outset, you can build your partnership upon the strongest possible foundation.