Bring In A Partner? Part IV

One of the most difficult decisions a sole owner of a business can make is on whether to bring in a partner or not. Ask many sole owners if they want to and the answer is “no.” Some have had the experience of having a bad partner or a once successful partnership that went bad. Others just do not want the interference with their control of the business. But others are thinking about it whether for the isolation they feel at the top, or the need for capital or for the chance to bring in a younger person to whom they can sell or transfer the business later on. In this series we are looking at the things that support a strong, successful partnership:

Clear written agreements. In the excitement and good will that surrounds the start of a new business or the creation of a new partnership, no one wants to think about planning for when things go wrong. In fact the absence of planning for that potential can hasten bad events. There must be clear agreement on how disputes must be raised and settled, how partners will be compensated and what happens if one partner dies, has a lengthy illness or becomes disabled. The partners have to decide on what insurance the business should have to fund a buyout of the business from the partner’s family. The partners should spell out the duties of each and update the list (in fact update all the agreements) as time goes by. Documenting these decisions can be expensive and require the services of attorneys experienced in setting up partnerships. But the investment on those clear agreements can be a lot less than the attorney fees associated with a bad split of the partnership.