Use these tips to keep your partnership on the right track.
Why 5 Tips? Five years ago, we started our first business together. If you had asked us at that time if we had a plan or any sort of methodology for growing our business, I’m pretty sure I would have laughed at you. We did what everyone does – everything as it came up. There was no general guideline for how to handle issues or problems and save ourselves headaches down the line. As our company began to grow and as we hired more employees, things became increasingly difficult because there were no guidelines for decision-making or expectations set with them either.
Finally, you and your partner should review your partnership agreement with an attorney. This document will outline the roles of each party in the investment business, including how decisions are made. Be sure to include specific responsibilities for both partners, as well as ways to resolve disputes. If you create a solid partnership agreement at the outset of your business venture, it can serve as a road map when issues surface down the road.<As this is a business relationship and not a marriage, try to avoid a 50/50 split, which can cause severe issues if there is adispute>. You should also decide on which method of ownership you will select through an LLC. If one partner should die, the other partner will own the property.
Investment partnerships can include an unlimited number of partners. The fewest partners are two, called the general partnership. A good example of a general partnership would be a husband-and-wife team or other family businesses. As long as both parties are contributing equally to the project they will feel the rewards are justly divided. In any case, each partner should have their own personal bank account into which all profit or loss is deposited only after considering what was earned or lost by each partner individually to ensure fairness in individual contributions and eventual payouts for each member of the partnership.
About Your Partner
After you’ve selected a partner, the next step is to find out more about them. The internet has made it very easy to search for information on potential partners. Social media sites like LinkedIn make it easy to look up a person’s business history, educational background, and other connections. Reviewing the financials of any businesses they have created or invested in gives you an idea of their wealth and stability as well. An investor that does not have experience running a business may be just as good if not better than one with plenty of experience. Entrepreneurs are eager, hungry, and motivated people while managers might be burnt-out from working for too long at one company or even the same industry (a downside to leverage can cause managers to consolidate and recoil in the face of adversity.
Mentoring is one of the most important factors in starting a business, especially if you are looking for your first venture. A good mentor will be someone who has been there and done that; they understand the financials, the accounting, legal and regulatory requirements as well as how to manage stress under tight deadlines. Mentors will also provide opportunities to develop skills through their own experiences. This can range from putting together an advertising campaign or debugging code on a website. They will guide partnerships when needed with other companies or individuals with their expertise and experience. You can earn interest by investing this type of time into your company now rather than paying it out later (the earlier you are establishing relationships with mentors, the higher payments maybe later).
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