by Brian McKay
As a small business owner, you might decide to get involved in a business partnership to enjoy some of the numerous benefits that include financial help, access to a new niche of clients, or a curated list of important contacts. Regardless of the reasoning behind forming a partnership, these business ventures can be very beneficial to both parties. However, you can never be too careful when it comes to matters of business. It is, therefore, paramount that you put measures in place to ensure you're protected, and that your investment is covered too. To help you get started, here are 4 tips for protecting yourself in a business partnership.
1. Equip yourself with a lawyer
A good amount of small business owners tend to forget or simply don't lawyer up. As a sole proprietor, this is, of course, excusable. However, once you enter a partnership, it is very important to get a lawyer. Don't simply lean on the fact that your business partner has a lawyer whether they ask you to or not. The main issue here is, in the event of a business dispute, your partner’s lawyer is always going to side with them over you, leaving you stranded. So, get your own lawyer such as Cappellini Law.
2. Draw up a written agreement
Unfortunately, a lot of small business owners still fall for the age-old trick of spoken business agreements. The problem with this type of agreement is that in the event that things going awry, you'll have no concrete supporting evidence to prove yourself in court. This is why you should always push for a written agreement. In this written agreement, there should be a clear description of what the roles, interests, and responsibilities of both parties are. Ensure that both you and your business partner sign the document, and just in case, make copies of the original.
3. Discuss compensation
If you're a small business owner partnering with a bigger business, you might be a bit reluctant to discuss compensation. Regardless of how huge the other partner is, the topic of shared compensation should always come up. You should discuss shared percentages of income, how profit and loss will be allocated, and even things like equity adjustments. Having these conversations, coming to a conclusion, and then putting the agreement in writing, ensures that you don’t get blindsided.
4. Plan your exit strategy
No one ever wants to hear or talk about planning an exit strategy, but sometimes, it just needs to be done. The exit strategy of a business should be included in the written agreement. Altogether, the terms should be fair for both parties. Prior to signing the contract, you should have already asked the right questions in order to get to know your business partner equally well, so that you can really deal with them both inside and outside of the business partnership. Furthermore, avoid small talk and keep all the contractual discussions relevant.