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Tips for choosing a business partner

| Oct 16, 2020 | business law |

If you are thinking of forming a business partnership, you need to be sure you choose the right person. Many companies and friendships have been destroyed because people assumed that being friends means you will work well together. As John D. Rockefeller once said, “A friendship founded on business is better than a business founded on friendship.”

These are some things to consider when choosing who to form a partnership with:

  • Do you share the same values? Imagine you are setting up a small hotel. You want to make it as sustainable and eco-friendly as possible. The other person sees it as an excellent opportunity to rent rooms to the local mining company. You do not have to agree on everything, but conflicting core values can be problematic.
  • Do you share the same vision? It is unlikely to work if your long-term plan is to make your employees shareholders, but your partner dreams of building the business to sell to a multinational.
  • Do you have complementary skills? You may have excellent creative and interpersonal skills while lacking your partner’s relentless drive and financial astuteness. By combining talents, you could achieve more than either could alone.
  • Do you have financial compatibility? You do not need to be equally matched but be aware of how this will affect the relationship’s dynamics. The person who puts in most funds will get more shares and have the final say in any split decision.

Once you have found the correct person to work with, you need legal help to make your business partnership official. Do not assume things will last forever. A vital part of your partnership agreement is planning for what happens if things do not work out. The clearer you are at the outset, the better.