What Is the First Step in Starting a New Business With a Partner?
The very first thing you must do when starting a new business with a partner is to clearly define the role of the partners in a partnership agreement. A broad assortment of considerations needs to be addressed and the basic infrastructure of the partnership needs to be established. To set up exactly how the the partners will interact in the company, five distinct categories should be addressed: responsibility/liability, capital, decision making, marketing and production control.
Other People Are Reading
-
Division of Responsibility
-
The division of responsibility for the company can be equal, or it may be divided in any manner the partners agree on. A silent partner may not have any influence or liability involvement, leaving the entire responsibility of the business to the other partner. The Small Business Administration advises that partners create a partnership agreement prior to formation of the company.
Capital Involvement
-
It is important to include the amount of each partner's investment in the partnership agreement if the division is anything other than an equal split. In most cases, the greater the investment, the higher the percentage of profits that person will receive. Whether or not that person will also hold more control of the operations of the company should be outlined in the partnership agreement, along with specific clauses that define how each partner will be paid.
-
Business Decisions
-
This part of the agreement is often based on the capital involvement of the partners, giving more weight to the greater contributor. In other arrangements, the larger investor may be silent, allowing the production-oriented side of the partnership to make most if not all of the company's operational decisions. The decision on how business decisions will be made is not regulated by existing law, but must be defined for each company in a document such as the partnership agreement.
Marketing
-
You do not have to specify what types of marketing will be used, but it is a good idea to include a passage that outlines the projected goals of marketing and any partner-oriented marketing plans that will be undertaken. For example, name which partner will be in charge of marketing copy, or who will shoulder the burden of making cold calls to possible clients.
Production and Employee Supervision
-
Both partners can share in employee management equally, but it is more common for the task to be delegated to a single leading figure. You can set up the business so that all major decisions are discussed before they are made, and then enforced by the officer in charge in your partnership agreement, to prevent either party from becoming a workplace dictator against the other's will.
-
References
Resources
- Photo Credit Jupiterimages/Photos.com/Getty Images
