How to Take on a Business Partner

As your sole proprietorship continues to expand, you could become so busy that you'll start to consider taking on a partner. When possible, try to hire contractors or employees, however you might just reach the point where one of your business associates has a complementary skill set to yours and that a partnership is the ideal way to motivate her. Partnerships take hard work. You need to find somebody who is thoroughly compatible with you. Throughout the process you need to communicate honestly with your prospective partner. The formal partnership documents should be drawn up by the attorney you’ve retained Here are the steps involved.

Instructions

Difficulty: Easy

1. Specify who contributes what to the partnership such as financing, other resources or expertise. Who makes what decisions? Which areas of responsibility will each partner manage?
2. Determine how the profits and losses will be split. How are you going to divide ownership? Remember that general partners are responsible for not only the percentage they contribute but for the obligations of the company.
3. Set up a trial period and determine what criteria would have to be met to remove a partner if it should become necessary. Decide up front what would happen if the partnership dissolves. Determine with your first partner what steps you should take if you find it necessary to take on another partner or further restructure your company.
4. Modify your business plan to reflect your new roles. Your plan is a living document. Before the agreement is actually signed, make sure that your business plan is up to date and accurately reflects what each of you will do.
   
   Since you are now relying on the contribution of your partner, you should consider getting “key person” insurance to protect each other in case one of you is incapacitated.