Have you been thinking of incorporating with a business partner? You may want to ask yourself a few questions before you incorporate with them.
Are you good partners?
When you first start out a small business, you really need to find a balance where you work well together. You also need a mix of talent because you are probably going to be covering a large variety of work.
What Are You Bringing to the Relationship? And How Do You Value It?
Do you work better if someone else is in charge? Or do you prefer to be the leader? The key to a successful relationship is that the relative contributions of the partners are clearly established and that everyone agrees on the value of each partner’s contribution.
Is Everyone Committed?
Does one partner have a family? They might not be able to drop everything when needed because of other commitments. Establishing a strong common understanding going in about the time and effort each partner is willing to commit and how the partners will handle competing commitments and life circumstances down the road will create a sense of fairness and trust that starts the partnership on common ground and also anticipates what will happen in the event these circumstances arise.
Is There Anything Important That Hasn’t Been Discussed?
There will always be those problems that are unforeseen. But as soon as something arises, talk with your partner about it.
Do You Have Sufficient Funding?
Sit down with your partner and develop a budget for the business, and personal needs. Identify how much is needed to start the business and where the investment is coming from. It also needs to identify what is needed until the business starts generating profit for you.
How Are You Going to Make Decisions?
In simple terms, you need to decide who is going to make the decisions. Many times, partners share investment and responsibility equally and agree to decide major issues jointly. Other times, a majority or founding partner has ultimate control over the future of the company, while a junior partner reserves the right to veto major decisions, such as selling the company or bringing on a new partner.
What Happens If the Partnership Ends?
I’m sure you don’t want to even think about the partnership ending, but you need to take it into consideration. Sometimes you can have a fight over something, and you decide to end the partnership, but sometimes it can be that other circumstances arise. Someone gets ill, someone passes away, a different job arises, maybe retirement? Either way, you need to plan ahead for what might happen if something happens.