Today we are taking a slight detour from our business setup formation - focus on discussing the key five points to consider entering into a business partnership. Entering into a business partnership can be very interesting. You have found someone who shares your idea, works well with you and has lots of great ideas. Together you feel you have what it takes to make your business dreams a fact.
Whether your partner is a long-time friend or someone you just recently met, it’s a great feeling to find someone you’re confident you can start a company with. However, before you go about investing a lot of time and money with this person, it is judicious to take a step back and look at the small business partnership from all angles, for both of your sakes.
1. A Partnership Agreement
All the partners should be prepared to put an agreement in writing. A written agreement may not be a lawful requirement in your state. Still, a well-crafted partnership agreement may not only shield you from personal liability issues, but it will also force you to think about how you and your partner, or partners, will achieve the execution of your business vision.
2. Determine the Roles and Responsibilities
Each partners roles and responsibilities must be notified and communicated. Even though partners don’t need to commit the same amount of time on the business, there must be a consensus as to expected time obligations. You will avoid the bitterness that may appear when partners begin distributing profits and comparing them to individual efforts and results. Responsibility for the day-to-day business direction must be based on what is best for the business.
3. Align the Partnership towards Profit
Profit will usually result when you create value for your customers. However, commitment from possible partners to the business must be as strong as yours. It is fundamental to consider how you and your partner will be accountable for results. Think about how you will measure performance and outcomes.
4. Communicate about the Partnership Dissolution
Business partners will likely go on their separate ways at some point. It would help if you prepared for that scenario by ascertaining how partners will be compensated, resources divided, and clients served when the time comes. Emotions will unquestionably run high if the partnership does not work out, so the best time to decide how to handle a break-up is before an association, or operating agreement is signed.
5. Develop an Exit Strategy for Each Partner
Ironically, you should enter the partnership, knowing that it will likely end someday. Thus, you should outline manageable steps for partners to exit the partnership when a need or circumstance arises.
Here are a few questions you can ask while entering into a business partnership -
- How well do you know each other?
- Have you worked together before?
- Do you trust the other person?
- Are your skills complementary?
- How much do you like them as a person?
- Are you both equally willing to make this business priority?
- Do you know your boundaries and limits?
- Are you ready to help each other out?
So there you have it: some tips for identifying the right business partner for your next project! Look seriously at the above five things to consider when entering into a business partnership so that your business starts on a firm footing.
We at Commitbiz can help you start a business in Dubai. Right from business incorporation to office space - we cover it all. Contact us today for more information.