How to Start a Business Partnership

[Croctopus]

We have contacted a business in Florida, and we are looking into starting a partnership. How do I create a relationship which is mutually beneficial?

[jamesray50]

You will need to contact an attorney to form a partnership if you are talking about a legal entitiy. If you are talking about an informal business relationship you may still want an attorney to draw up a contract specifying what each of you expects. Good luck!

[jcalvin077]

i am not in favor of starting a business in partnership. i get loss in my business when i start it with two of my best friend we explore it till two year but after that they are start there own business and i get a loss.

[Osprey]

Be careful when starting a partnership. Good friends don't make a good business partnership, but a good business partner will make a good friend.

:rolleyes:

[Jeff_B]

Your first step needs to be finding an attorney, They will make sure all of the proper stipulations are in place. For example who plays what roles in the company, who is the operating member, CEO/President, Secretary. It will also ensure you don't get completely taken advantage of.

[Freelancier]

I think you're using "partnership" in a relationship sense and not a "business structure" sense. Which is fine, but it's creating some confusion in the answers.

First step is to figure out what each of you brings to the table that the other values. Then figure out how to agree to use your respective assets for the benefit of both. Then draw up an agreement (with the help of an attorney) detailing it. Make sure you figure out how to easily terminate the relationship that is agreeable to both parties.

Good luck!

[oliamwright]

Equality creates stagnation.
Some of the best partnerships I've worked with were surprisingly unbalanced. 50/50 never works. Imbalance creates opportunities for ownership, accountability and ability to leverage and transfer assets, as long as there is a clear delineation between what those asset groups are.

For example if one side builds up a team and infrastructure, whereas the other side acquires capital and manages marketing and distribution; then you can set the framework by which the marketing and distribution partner receives greater equity, so in the future they can use their capital to buy out the team and infrastructure you've built.

In this case, the marketing and distribution team is incentivized to sell aggressively for large profits; whereas the team and infrastructure side of the equation can set the terms of the expenses prior to profit distribution to keep things balanced.

[Stephen]

Hi there,

Assuming you are not talking about a legal structure (JV, Trust or else) and just about an "alliance" you may want to draft at the very least an NDA and a Memorandum Of Understanding (MOU) but be mindful that an MOU is not as such legally binding. So if things start going south, you will be in for a long and painful commercial/legal battle - unless, and that's probably the best thing to think about when partnering, you and your partnering entity are actually addressing separate issues/market share/customer targets, in which case a MOU is likely to be clear enough.
Having an attorney involved or a strong Commercial Manager is good practice anyways.
Last - fix any potential issues linked to profit sharing and commissions on leads and conversions at the very beginning, before money starts to flow in. After it can become messy...

Cheers!