How do I structure a business partnership?
Any company with more than one owner will have its complications, but this partnership can be retained for life by following the next steps. Remember our list of skills in the article ‘How can a business partner help me?’ We talked about design and business capabilities, but there was no mention of law. You will need legal help from professional attorneys to structure the partnership on key terms like ownership, equity, accountability, assets, and liabilities in writing. Your new-formed, little world will have to go through nine checks of reality, which then will be signed by all partners.
Check 1: The pre-check phase, keeping it simple, do what is necessary. For example, credit check - double-check it using two to three credit agencies.
Check 2: The advancement in digital infrastructure has made it possible to do a background check yourself. See if you find anything suspicious or something that you might not feel comfortable with if your customers found out. If anything does surface, be sure to communicate it to your partner. The company is dependent on your image, and as your business partner, they will be the face of the brand with you. Observe their actions in public and if they are productive to the business’s image in the market or not. Our professional associations are established in service of our professional aims, whereas our personal relations develop out of our basic human necessity for love, bond, and belonging. These personal relations appeal greatly to an individual’s personality.
Check 3: Learn everything from their past work experience, successes, and failures. Determine their relationships with the people around them, and the quality of the work or passion they pursue. Talk to their past colleagues, check their LinkedIn profile, their ex-company reviews. Be aware of their professional life and work ethic, as it will define your working relationship.
Check 4: Get to know each other outside of work. Go for a coffee, lunch, or a family trip and bond with them. Get observations from your friends and family, and then finally gain an all-inclusive understanding. Create a list of all the strengths and weaknesses and get to an all-around valuation of their work, personality, and skills. Review it by speaking to yourself and to people who like or dislike your potential business partner.
Check 5: After principles and key issues, you must now negotiate the terms of agreement of your partnership. This is for legal and financial purposes based on your assessment. You must answer the question, what is the value of your partner in your business? Usually, when a new partner joins, they underwrite a certain amount of money, showing their trust towards the partnership. You need to decide how much each initial partner and new partners in the future will contribute, and how many shares each partner will hold in terms of profit as well as loss.
With each check, you will be building a foundation for your relationship. Several startups fail due to money-related issues. The greed of profit and fear of losses both harm personal ties. These checks will help avoid such issues. It gets easier from here, because if you are here, it means you are on the right track.
Check 6: Trust, honesty, and understanding are significant elements in any relationship. Verbal promises might be binding in earlier centuries. But having the fundamental characteristics of a partnership in writing shields the interests of all present and future partners, thus preventing catastrophic conflicts.
Check 7: The partner's role also needs to be inscribed, whether limited, silent, or general. Their shares must be clearly scripted, their contributions, seniority, and voice need to be spelled out in your contract. This communication will help you understand what type of partnership to choose. It may be a limited LLP, under a government scheme, or something else that your attorney suggests.
Check 8: Well, your newborn business is almost ready, so go ahead and give it a name.
Check 9: Create your agreement and get a complete and clear understanding of all the legalities— things like licenses, patents, permits, registrations, bank accounts. Also, get the unique ID number for your firm. Keep your lawyer in the loop but your partner in trust.
Key things to consider are the risks in the company, equity, stocks, distribution and movement of cash and profits, sharing the responsibility of losses, accountability of work output, the vision of the business, targets, structure of teams, and leadership roles. Most can be worked out by communication, but everything has to be put in writing. Consulting professional lawyers in your network can help you learn more about the details of a business partnership. They will assist you in matters like agreements, the legal implications, and the processes involved in solidifying them.
Next time we will talk about how to draft your business plan.
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About the Writer
Anchal Srivastava is an architect, urban planner, writer, researcher and scholar. She is a certified GIS specialist from IIRS, ISRO, Dehradun. She is a graduate of the School of Planning and Architecture (SPA), Delhi and Dr. A.P.J. Abdul Kalam Technical University (APJAKTU), Uttar Pradesh. She has experience working at the Town and Country Planning Organisation Delhi, Jabalpur Smart City Limited, Suresh Goel & Associates (SGA), APS Green Architects & Associates, and as the head architect at SSAP and Shantiniketan Buildtech Pvt. Ltd.
About the Editor
Nidhi Joshi is a writer, architect and artist. She experiments with art, calligraphy and all things Interior Design. She is a graduate of the Bharati Vidyapeeth College of Architecture, Mumbai. She has experience interning at PG Patki Architects.
About the Illustrator
Priya Bansal is an architect and a generalist, currently based out of Delhi NCR. She is a graduate of the School of Planning and Architecture (SPA), Bhopal. She has experience working with Studio Juggernaut.