If years were given themes, 2022 would be the year of how to mitigate risk.…
4 Tips for Drama-Free Partnership in Business Planning & Formation
Life is colored by the relationships we form. Our marriage or romantic partnership, relationships with our children, family, friendships, and professional partnerships animate our days, inform the way we live, and provide us with a raison d’être (a reason to be). We wouldn’t be half of who we are without the people around us and so it is surprising that, according to the Small Business Administration (SBA), 70% of small business owners decide to go it alone. Partnership in business, like in any other aspect of life, can be a powerful, profitable endeavor but only if the drama does not get in the way. Below are four tips for keeping a partnership in business on track for the benefit of both you and your enterprise.
4 Tips for Nurturing a Successful Partnership in Business
1. Construct a Shared Vision
Just as shared goals, hopes, and dreams are essential to a romantic partnership, so too is a shared vision a cornerstone of any profitable business partnership.
Before entering into a partnership with a potential associate, have a frank discussion about the strategic direction you wish your company to take. Talk about where you see yourself in a year, five years, and ten years. Talk about growth, management style, even succession planning. And then commit all of this to writing.
2. Determine the Structure of Your Partnership
Businesses come in different shapes and sizes depending on your needs. How you choose to structure your enterprise, and, by extension, your partnership will determine everything from taxes to growth opportunities. Common forms include a general partnership, limited partnership, limited liability company, limited liability partnership, and joint venture, among others. An attorney experienced in the intricacies of business plan formats is your best resource for more information on the structure best-suited to your needs.
3. Define Your Respective Roles and Responsibilities
When you start a family, you talk to your partner about the role each will play. If you didn’t, the tension would quickly erupt, and the kids would suffer. Likewise, when you start a business, you need to determine who will handle what and how responsibility will be shared. Overlook this detail, and drama will follow.
You and your business partner have chosen one another because you each bring unique strengths. Dividing responsibilities in light of these strengths and respecting this division as much as you respect your spouse’s ability to carry their weight in your relationship is crucial.
4. Face Financial Risk Upfront
Whether you found a general partnership, limited liability company or one of the other business plan formats mentioned above will have an impact on the financial liability you and your partner assume.
Furthermore, the sort of financing you pursue (say, debt financing vs. equity financing) will imply different levels of risk.
Before any ink hits paper, you need to ensure that you and your partner both understand and are comfortable with the financial risk implied by your venture.
Financial risk is not like physical risk insofar as the consequences of the former often imply greater long-term consequences and thus carry a high potential to generate conflict.
Like every other aspect of your partnership, it is important to address this subject head-on.
To learn more about nurturing a successful business partnership or about any other matter related to business success, do not hesitate to reach out to the Law Firm of Christopher W. Dumm either by calling 417-623-2062 or using the contact form on our website.
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