Taking on a business partner can help you with the health and growth of your business. But following proper procedures is key to success.
Uschamber.com offers the following guidelines to create a lasting business partnership and avoid future complications.
- Choose the right partner. Once you give up equity in your company, it is difficult to get it back, so choosing the right business partner is crucial. When choosing a business partner, consider trustworthiness; the expertise and traits he or she can bring; whether the person is fiscally sound and able to contribute; and whether the person’s strengths and weaknesses complement your own.
- Prepare a detailed partnership agreement. A comprehensive contract between you and your partner provides a solid foundation. A good partnership agreement offers both parties legal protection; dissolves ongoing disputes; outlines each person’s contributions, expectations and duties; dictates financial allocations; and instructs how you make decisions.
- Select a partnership structure. The business structure will determine the amount of liability each partner takes on and the tax benefits you will receive. It is important to check with an advisor to explore options such as general partnerships, limited partnerships and limited liability partnerships.
- Comply with regulatory and tax requirements. Laws and taxes may vary depending on the business’ location, type of business conducted and how you structure your partnership. Before you create a partnership, you may need to acquire licenses and permits. Most business partnerships must register with federal, state and local agencies and obtain a tax and employer ID number. Check with your state and locality to confirm permit and licensing requirements.
