A business partnership can give you some pretty potent advantages. General partnerships aren’t required to pay business income tax, and they allow you to pool your resources more easily and inexpensively than forming a corporation.
Choosing the right partner is perhaps the single biggest contributor to the success or failure of the business, however. Your partner will be backing the business with their personal assets and having an equal say in operations. A limited partnership offers some legal protections in terms of debt liability, but it can’t protect a business from the negative consequences of a poor partnership fit.
So what exactly should you be looking for in the ideal business partner? These are some of the most important factors to consider.
1) Communication And Compromise
Ideally, you and your partner will be in total lockstep when it comes to your vision for the company’s business strategies, future and values. It isn’t 100% necessary, however; just look at how often Jobs and Woz or Gates and Allen butted heads. What is vital is that both parties can communicate and listen to each other, and have at least some willingness to compromise in the best interests of the company. Partners who are stubborn and combative are going to needlessly escalate every disagreement or dispute when it doesn’t go their way.
Running a new business pretty much consumes your life, even if it’s a very small business. If your business partner has their finger in a bunch of other pies, or has too many personal issues they’re trying to attend to while also working, it’s very unlikely that they’re going to devote adequate time to the company’s needs.
3) Contrasting And Complementing
The perfect partner will be strong where you are weak. This is where many people get hung up, as this requires taking a very honest and brutal inventory of yourself to determine what you’re simply not that good at (and you’ll also likely gravitate toward people who are similar to you). To cite a common Silicon Valley dynamic, the withdrawn and somewhat introverted tech whiz is probably going to benefit more from a partnership with a business-oriented extrovert who has natural “hype man” inclinations.
4) Consider The Full Range Of Assets
Ideally, you’ll partner up with someone who has plenty of cash on hand, no significant debt, and a willingness to invest in the company’s future. Other assets are just as important, however, especially if Daddy Warbucks isn’t available. One great quality to look for is someone with deep industry connections. Another is specialized knowledge and expertise that you don’t already have. For example, bookkeeping is a skill that new businesses often overlook until they’re suddenly forced to pay for it.
5) Willingness To Sign On The Dotted Line
If it isn’t on paper, it doesn’t exist. That’s the attitude you should always have toward your business, and that includes the terms of the partnership. An unwillingness to draw up and sign formal papers laying out duties and expectations can indicate a few different things about a partner — they might not really be committed to the business and a risk to pull out in the near future, they might have something dishonest planned, or they might not have enough trust and confidence in you for the arrangement to work.
6) The Escape Hatch
Even seemingly ideal partnerships can end up going south for one reason or another, sometimes for circumstances beyond anyone’s control. The problem with legal partnerships is that one person’s exit basically ends the existence of the company. To avoid this, set up a buyout agreement in advance, which stipulates the terms under which one partner can buy out another’s interest in the company if they end up leaving.