Some of the most prolific and successful companies in history began as partnerships. Think McDonald's, Hewlett Packard, and Google. On the flip side, you have those partnerships that went down in flames. Facebook's split between Saverin and Zuckerman, Citigroup's breakup between Jamie Dimon and Sandy Weill among others. That's why it's important to do your homework, consult a professional, and don't let emotions get in the way.
A business partnership is just that, a 'business' deal, and is not something you should enter into casually. Just because someone is your best friend or even family, doesn't mean that legal complications and disagreements won't happen. This month, King Law pointed out in its newsletter four points that should be addressed and clarified when forming a business partnership.
- Know what you're responsible for including partnership debt
- Define who has authority to act on behalf of the business (purchasing, vendors, hiring, new investment, etc.)
- Agree on an exit strategy now, don't wait until things are unraveling
- Address potential legal problems with an attorney prior to finalizing the partnership
I would also add that you should consult with your tax professional to learn the best way to structure your partnership from a tax perspective.
A partnership may be just the right thing for your business. But its wise to address potential pitfalls and learn the legal ins-and-outs of business partnerships before signing on the dotted line.
, as well as our other law firm members
are happy to provide free or minimal-cost consultations. Think of this as business insurance that will protect you and your partner into the future.