If you are starting a business with someone else, or if you have decided to bring on a partner to your existing company, this is a big decision that can be a great move. Having a partner can be beneficial in many ways, such as sharing liabilities, dividing the workload and having a soundboard for your ideas.
However, there are two things that increase the chances of a successful partnership: Choosing the right partner and writing up a partnership agreement.
Qualities of a successful partner
According to Entrepreneur, experience is not necessarily the number one thing to look for in a business partner. Although experience in business may be helpful, it is more important to look for a partner who has qualities such as work ethic, willingness to take risks, passion, business skills, industry knowledge, creativity and innovation.
You should also share the same mission, vision and goals for the business. Being able to communicate with and trust your partner is also extremely important.
What to include in a partnership agreement
Although there is not a requirement for partners to create an agreement when starting a business, the U.S. Chamber of Commerce discusses that having one defines each partner’s role, helps resolve disagreements quickly and outlines dissolution strategies.
Along with basic information such as the name of the company, other things to include in the agreement include:
- Each partner’s financial and other contributions to the business
- Business ownership percentage
- Profits and losses division
- Conflict resolution strategies
- Valuation process of the business
- Dissolution plans in the event of partner withdrawal or death
You may also wish to include how you would handle the situation if you both chose to take on another business partner.