Running your business as a partnership can mean you share the risk, responsibilities and mental load rather than taking all of these on by yourself. It can also mean you have less control over some aspects of your business and have to take others into account with every business decision.
If you’re setting up your business as a partnership, you need to have clear expectations, responsibilities and agreements in place with your business partner (or partners) from the beginning.
Here are some tips to help you get set up for the best chance of success as a business partnership.
Get everything in writing
Before you launch your business, you need to discuss and document what’s important to your business – and make sure you document these discussions.
This is the time to check that everyone has realistic expectations, especially in terms of what they will contribute financially and personally. You don’t want to have a power imbalance in the partnership before you start, so make sure you ask the difficult questions beforehand. Make sure your expectations are reflected in your partnership agreement.
You’ll need to:
- Document your shared values, what good faith means and how you’ll communicate effectively to handle challenges as they arise.
- Record regular and open discussions about your partnership as the business grows and circumstances change.
- Decide who is involved in financial arrangements, payments, income and bank accounts – and get this in writing. For example, issues with signatories to bank accounts can arise when there’s an issue within the business, so be clear on these responsibilities from the start.
For more information, read our guide to starting a business a partnership.
Plan ahead for disputes
Commercial and personal disputes are a normal part of growth, but unresolved conflict can result in business challenges, along with personal and legal costs.
Be prepared to have difficult conversations early in your partnership, including what to do if a dispute arises.
Make sure dispute resolution clauses are clearly outlined as part of your partnership agreement, based on the best interests of the business. Clauses found in legal documents should go beyond a process. Make sure these clauses are spelled out clearly for everyone and have confidentiality provisions to protect everyone when a dispute arises.
For more information, read our blog with tips on how to handle a dispute in a business partnership.
Have an exit strategy
It’s not easy to walk away from a business partnership – so you need to have plans in place from the start. This includes succession planning for what would happen with the business in the event of death, or if one partner was unable to continue the partnership because of illness or injury.
You need to consider your on going legal responsibilities after the partnership has been dissolved including taxation obligations, industrial responsibilities concerning workers, intellectual property and others. Again, make sure you have everything in writing from the beginning.
Tap into the potential benefits
Running your business as a partnership could be the best step towards achieving your goals. If you have the awkward and difficult conversations from the beginning, you can help set your business up for success and enjoy the benefits of your partnership. Take the time to reflect on the reasons you’re starting your business together and what you hope to achieve together.
To learn more about starting a business, explore our information on starting and growing a business and our range of practical business skills workshops.
