While many companies start with a single person and an idea for something great, there are plenty of other companies that start with a partnership between two or more people. The reasons to do so are plentiful, so I won’t go into all the details– rather I want to discuss some of the elements you should be thinking about when forming a partnership.

Plan for the worst

One of the very first things you should think about is a buy/sell agreement. Essentially this is a discussion of what will happen if someone wants out. How assets, liabilities, equipment, clients, the company should be handled. This alone can be an incredibly complex process to outline. However it doesn’t have to be that difficult, and what many a business coaches recommend is the following:

• The partner that wants out of the business names a number
• The remaining partner(s) now have the option of selling the business to the partner, or buying it from him

This incredible simple situation ensures that a fair number is reached. To pick a number too high or too low would be self damning.

Keep it Equal in Shares

There is a tendency to want to be the majority shareholder, or to have one person as the majority shareholder in the company. After all if a decision can be reached, what do you do if no one has more weight than the other?

However it is better to develop system of deliberation and problem solving than to assign majority shareholding to one person. To have majority ownership of a company would permit one to fire the other partners, spend all the profits of the company in his/her own salary and essentially leave the person who has minority ownership with nothing.

Develop an Operating Agreement

It is important that everyone is on the same page when it comes to how the business will be run. Like anything in life the more you plan the smoother things will run. You would hate to arrive day one and realize that no one wants to do the sales, and the company can’t even get off the ground. This will also help establish validity if you feel that one partner is not pulling their weight, and should be paid less because of it.

Lets look at some of the items you should consider in forming a partnership:

• What is expected of each partner
• At what point does there have to be joint agreement to authorize an expense
• What decisions can be made by one partner, what requires everyone or majority agreement?
• How will bonus’ work, how will salaries work?
• How will disagreements be handled?
• What are your five year plans
• Vacation days, sick days
• Employee plans
• Health Care, Benifits

Once you have figured out how you would like to have the business run, prepare for the worst with a buy/sell, it is important to take these details to an independent lawyer who can draft the legal terminology in a bulletproof manor.

Go luck, and great profits

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Tags: corporation, forming, legal, partner, partnership