Why having a difficult conversation with your business partner is necessary.

Why having a difficult conversation with your business partner is necessary.

Getting married is like starting a business with someone else. It’s even harder if you have multiple partners. How well-informed are you about your business partner? What facts about your business partner should you know?

Before you start your business together, you should ask each other questions about their personal financial situation. Is there anyone who doesn’t have a financial cushion and lives paycheck to paycheck? If your company needs money at the beginning, which is common, this affects you.

Is your coworker a saver or a spender? Spenders use everything they can get their hands on, even money from businesses. Has anyone recently filed for bankruptcy? Is everybody okay? Do you have any health issues that will limit the amount of time you and your partner can spend working on the business? Are there any issues in your family, whether they involve children or older parents, that could keep you or your partner from fully concentrating on the business? How will profits and losses be divided? Is there anyone who contributes so much that they ought to receive more than the rest? What if they are only bringing cash and will not be employed by the company?

What treatment will that partner receive? What business expertise does each person bring to the company? Which of you is an expert marketer? Who is proficient with finances? Who is an expert in software and computers? What expectations do people have for the company? Does one of you prefer to remain small while the other prefers to expand your empire? Are you all hoping to stay in business for a long time, or is one of you considering starting a company that could fetch a large sum of money from a third party? Do you anticipate that each of your partners will work full-time for the company? Does anyone think they can manage multiple businesses simultaneously if they are the owner of another business?

What are your plans in the event of disagreement between the partners? What will you use to break a tie if there are two of you and you each own 50% of the stake? Avoid this conversation at all costs. If you don’t know everything about your business partner, things will only go wrong. Your shareholder/operating agreement ought to contain a record of every issue that you discuss. Consider how much more expensive it will be if you open a business, things go wrong, and you want to leave or push your partner out if you think resolving these very important differences now is expensive. To obtain a safeguarding operating/shareholder agreement, contact me at 201-251-8001. Getting it done right now will pay off because it will be less expensive and less stressful than when you and your partner are at war.