Everything You Need to Know About Business PartnershipsIn his book The Tax & Legal Playbook, CPA and attorney Mark J. Kohler targets the leading tax and legal questions facing small-business owners, and delivers clear-cut truths, thought-provoking advice, and underutilized solutions to save you time, money, and heartache. In this edited excerpt, the author offers some smart advice for creating a strong partnership.
You'd be astounded at the number of clients I meet with who literally know nothing about their partner’s background, their approach to business, and their vision for the partnership. They rush into the relationship so quickly that they don’t even gather this fundamental knowledge about their partner.
Here are some issues to consider before you ink any partnership deal:
1. Obviously, only go into business with those you trust. Vet everyone in your business dealings, whether it be a contractor, a tenant, etc. This could mean conducting background checks and calling personal references. This is especially true with your business partner(s) and is by far the most important way to protect yourself when entering a partnership.
2. Address potential issues before they become issues. Talk about worst-case scenarios. If your partner isn’t willing to do so, for whatever reason, you have the wrong partner.
3. Read and understand your partnership documents before you sign them. A good attorney can help you identify possible issues and present solutions, but ultimately you and your business partner(s) need to take ownership of the agreement and share a thorough understanding of how it will govern your business.
4. Consider getting separate counsel if using the same attorney as your partner(s) is presenting concerns.
5. If you live in a community property state, have every business partner’s spouse sign the partnership/operating agreement and any amendments. The spouse presumably has an ownership interest in the business, and you want them to agree to the provisions of the partnership/operating agreement. This is especially important regarding the method of valuing the business when buying out a partner in the event of a divorce.
Source:
https://www.entrepreneur.com/article/244632
