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5 important steps to take when forming a business partnership

Forming a partnership can be a very successful step in creating a strong business plan. As you build a foundation for a business of any size, you need different skill sets and investments, and you may not be able to do it on your own. Businesses often prosper and grow faster when complementary skills and assets are added into the partnership. Unfortunately, a business partnership done wrong can also spell doom for a company in any industry. If you follow these steps when forming a business partnership, you may avoid major pitfalls that negatively affect your company.

1. Obtain a written agreement

Just like any relationship, you both come into the partnership with expectations for the other. If they are not spelled out in written form and agreed upon by both parties, the results can be disastrous. A written agreement should be drawn up by an attorney and define issues such as net income division, changes to the structure of the partnership and tasks and responsibilities that fall to each party. If you both know what is expected of you in writing from day one, you are better prepared to succeed.

2. Create a way out

If you start a business together, you must be aware that it may not work out. If the business fails or one of you wants out, do you have a plan in place to do that seamlessly without it affecting your customers? Before a partnership is created, there should be an exit strategy that allows for one partner to buy the other out or walk away without doing major damage to the business.

3. Know state regulations and requirements

State law often requires that a substantial amount of paperwork be filed before a business partnership can be formed. To avoid problems, make sure you and your partner are aware of all state regulations and laws, and that all paperwork is filled out and filed to protect you from fines.

4. Take your time and consider the ultimate goal

It may sound great to hook up with a partner to grow a business that you have been working on, but rushing into a partnership with the wrong person can deal a death blow to your dream. If you choose someone who has different goals or different methods of handling business, it can be almost impossible to mesh your ideas together in a successful way.

5. Consult an attorney

A business partnership can be a hugely successful aspect of your business. If you are thinking of forming a partnership and want advice or protection when it comes to what is right for you and your company, consult with an attorney before making any big decisions.

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