The BizFilings blog covering business tips and trends.
Will You Be Mine?
Published on Feb 13, 2013
Check out 'Will You Be Mine?' at 'Time to Start Up,' the small business blog by BizFilings.
By Adam Toren
Finding the right business partner can be as difficult as finding the right spouse. It’s quite similar, in fact. You’re going to be spending a lot of time together, sharing financial burdens and successes, and communicating your dreams and shifting aspirations to one another. So you’ve got to approach finding a business the partner the same way as you would approach finding a mate for life. Take your time, have a “dating and engagement” period, take precautionary financial measures, and discuss all the possibilities of which you can think.
A business partnership is relatively easy to set up. Of course, different states have different laws so you’ll need to do your research, but a business partnership generally only files taxes once, unlike a corporation, which must file taxes based on income and shareholder dividends. Just because it’s relatively simple, however, doesn’t mean you can take the decision lightly. After all, you and your potential business partner are going to be financially responsible for one another. You can be held responsible for the financial mistakes of your partner. Before entering into a partnership, draft a detailed agreement that identifies the limitations and responsibilities of each partner, the division of profits and losses, and a plan for dissolution.
Looking for Love and Courtship
So where do you meet potential business partners? The answer is as difficult to answer as asking where to find a spouse. Your best bet is to put yourself out there. Network as much as possible and don’t limit yourself to only the social networks. Finding a business partner online is possible and even likely, but if you’re actively making personal connections with people, word about your business interests and ideas will spread. Who knows? You may be set up on a blind “business” date and meet the partner of your dreams. When you do find someone you feel a connection with, go though a “dating” phase before committing to partnership. That is, try to accomplish small challenges together and complete a few projects before you dive in to a partnership.
You Complete Me
Often it’s a good idea to look for a partner who complements your abilities and fills in the gaps in areas that you may be lacking. This is the “opposites attract” theory. Maybe one person is a technological wizard but lacks skills in networking and marketing. Maybe one person is a by-the-books financial guru but is not great at managing a team. As your business grows, you may discover that two partners are simply not enough to fill all the roles you need to succeed. As your team grows, make sure each person fits into your business like a puzzle piece. Everyone should share the same vision and understand the steps they need to take to reach it. Remember, investors always look closely at a management team before parting with their money.
After working together for a while, sit down together and discuss a formal partnership. Be completely honest with one another about what you expect from your partnership. Do you share the same vision? Do you have similar ideals and ethics? Are you each willing to make similar sacrifices to achieve your goals? If you vary too much with your answers, it may be time to take off your rose-colored glasses and go your separate ways. Ending a business partnership is not the end of the world, but like ending a marriage, it can be a huge burden financially and emotionally. Ideally, you want to find the right person the first time.
Of course, life isn’t a fairy tale, neither in romance nor in business. Though you may not want to think about it, you must draft an exit plan in case your partnership dissolves. Decide upon a fair way to absolve yourself from the business if you must. This can be a bidding proposal at which the other person must sell or propose a slightly higher counteroffer. You can also utilize an intermediary to facilitate the process. Include reasonable options for financing as well. Whatever you do, make sure both you and your partner agree on the terms before forming the partnership. It will make things much easier if things do not work out.
Adam Toren is an Award Winning Author, Serial Entrepreneur and Investor. He Co-Founded YoungEntrepreneur.com along with his brother Matthew. Adam is co-author of the newly released book: Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” and also co-author of Kidpreneurs.