15 Point Checklist for Starting a Business Partnership

Starting a business partnership is contingent upon many tasks, agreements, and understandings. Sometimes, we are so fixated on what will happen after the Partnership has begun that we forget everything we must do before starting the business.

By Brad Nakase, Attorney

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Table of Contents

1. Introduction

2. Choose the Correct Partner

3. Define the Terms of the Partnership

4. Communicate Often and Effectively

5. Make Plans as a Team

6. Share a Vision

7. Define Roles in the Partnership

8. Maintain an All-Important Sense of Trust

9. Be Able to Envision “Partner Harmony.”

10. Remember to Stay Authentic

11. Discuss Shared Goals

12. Agree Upon a Business Plan

13. Write an Operating Agreement

14. Discuss Marketing and Advertising

15. Make Strong Decisions

16. Write Out an Exit Strategy

17. Contact a Business Attorney

Introduction

Many in the business world compare a rewarding and successful partnership to a successful and rewarding marriage. In truth, it is an apt comparison because both unions require commitment, trust, and communication, among other attributes. However, creating a long-term business partnership can sometimes be more challenging than celebrating a 50th wedding anniversary.

Initially, you may wonder if you truly need a partner or a series of partners. In truth, if you can create a sole proprietorship that is successful and profitable, then perhaps that is your path. However, many entrepreneurs see something within their prospective partners or partners they feel they do not have or cannot achieve independently. Sometimes, what they see are talents that complement each other. In some cases, partnerships highlight the best of the individuals involved and surpass what the entrepreneurs could have accomplished because of this synchronicity.

Whether your partner is a whiz at selling to customers while your talents skew to keeping the books, or you have a stellar idea, but your partner has the funding—and the belief in you—partnerships are all about finding balance. If you are committed to starting a new business partnership, there are some critical tasks to review before signing the agreement. We present a 15-point checklist for you and your partner to check to avoid becoming a statistic as to why business partnership fail. We hope it inspires deep thought, reminds you of some critical aspects of business partnerships, and encourages you.

When individuals approach the process of starting a business partnership honestly and are ready to learn, they are in good shape. When you’re ready to move forward, please contact our partnership agreement lawyer to start your new business partnership.

Choose the Correct Partner

You may think this goes without saying, but unfortunately, many businesses miss this step and can never look back. Forming a partnership with the right person is essential, yet the “right partner” differs for everyone, just like marriage. Despite that, some qualities are ubiquitous in successful partners. Business partners need to be able to trust each other and be good communicators. Perhaps most vital is the idea that company partners should complement each other. When starting a business partnership, you should have the sense that your partner possesses skills or attributes that you do not and that these talents will work together with your own and help push the company forward. The idea here is that the correct partner will allow you to accomplish goals that alone are impossible.

Define the Terms of the Partnership

Successful partnerships have many things in common; one of these things is that the partners set the tone of their working relationship early in the process. Defining and agreeing on terms earlier will make everything easier, including success and adversity.

It is integral to figure out who is responsible for what daily, weekly and monthly duties and how much capital each partner will bring, among other vital responsibilities. However, many prospective partners forget to define the tone of minor things, such as work ethic and acceptable office behavior. When strategizing about these little details, be honest and open about what you are lenient about and the behavior, language, or habits you cannot tolerate. Then, encourage your new partner or partners to do the same.

Communicate Often and Effectively

You haven’t been reading closely if you haven’t understood how important good communication is when starting a business partnership. Entering into a productive dialogue with your partner should be a daily occurrence. Most people see communication as inherent, but it is a skill to be practiced and worked on. From the start, business partners should value clear, concise communication and work at it. Partners should not hesitate to express their feelings, goals, expectations, opinions, and objections to each other. The key here is to share your thoughts about the business. Also, different people have different communication styles, and not all complement each other. If early discussions quickly turn problematic, or your partner, for example, does not respond to emails or texts you send, consider finding a new and more compatible partner.

Make Plans as a Team

We do not imply that business partners must make weekend plans together, although they might sometimes! Instead, we are referring to getting organized and creating business plans together. These might be plans for the next week, month, or even year of operations or specific goals for a presentation or new sales initiative. Whatever it is you are planning, keep in mind that good partners plan things together.

Also, planning together does not mean that the talkative partner dictates while the more reflective partner writes down the plans for the week. Instead, this step builds off of our emphasis on communication and dialogue. Both partners should meet (in person whenever possible, pending the pandemic) and offer each other ideas, strategies, resources, and proposals. When both partners feel comfortable taking the helm in planning, the relationship grows more robust, enjoyable, and dynamic.

Share a Vision

An initial vision inspires every business, and ideally, that vision is shared by the partners. We realize “vision” is a general word, but you must fill that blank canvas with exciting ideas for the future. What do you and your partner seek to accomplish, and even more importantly, what actions you can take now will put you on the best path to success? One of the keys here is for partners to agree on a shared vision for the company, thinking in the short and the long-term. When a business partnership becomes fractured or contentious, it is usually because the partners are either in it for the wrong or different reasons. Routinely share your goals and objectives and have a mission statement that is written down and documented so you can fall back on it. Creating a concise, well-organized vision and an efficient way to get there is essential for a successful partnership.

The point here is to recognize and identify your business vision and be honest with your partner. Your dreams and goals do not have to be identical, but they must be shared and approved by each other. Likewise, you may have a different five or ten-year plan than your partner, but each of you should be aware of what that is and how the business fits into it.

Define Roles in the Partnership

Within the constant flurry of business decisions, calls and emails, and proposals that make up a healthy business partnership, position roles and duties can become lost. This is especially true in a partnership because, in many ways, both partners are “in charge.” This is why it is essential to outline the responsibilities of each partner in writing before the Partnership is set to begin. We also recommend reviewing and possibly updating these rules as time passes and the Partnership—and business—changes. If a partner or employee is unsure what their role translates to, for example, daily, the Partnership should welcome questions and provide information.

Another way to accomplish this is to have both individuals write informal job descriptions themselves. While these are only for your use, they should outline the main areas of responsibility that everyone will focus on. Again, make them as specific as possible so that you do not realize that some of the vital business responsibilities have been forgotten later.

Once both partners have written their job outline, it is time for the most critical part: sit down and converse. Share the job outlines with each other and engage in a productive dialogue. Does anything surprise you? Are there areas of overlap that should be taken care of so you do not waste time doing the same thing? Once you feel good about each other’s leading company roles, revise the job descriptions as you see fit and print or save copies of these. Now, you have a record of designated responsibilities to guide the Partnership.

Maintain an All-Important Sense of Trust

A solid foundation of trust is just as necessary, if not more important, than effective communication. Before starting a business partnership, make sure that you can trust your partner inside and outside of the office. Small business partners will also undoubtedly face their share of challenges and adversity, so being prepared for this is essential. The more hard work and thought that partners put into preparing for their business careers, the better. This includes being open, forging trust, and understanding each other’s strengths and weaknesses.

If we know anything about the business world, it is that stressful situations and even disasters do occur. However, when we are met with adversity, this is usually when our true selves emerge and when we need help from others. If you can trust your partner when the going gets tough, you may have found a business partner you will be with for life.

Be Able to Envision “Partner Harmony.”

As we mentioned, one of the reasons business partnerships are created is because the partners envision a richly complementary skill set that will take their mutual project to new heights. However, skill sets that work well together rely on another essential factor: balance or “harmony.”

We have all been involved in one-sided projects and reports when we feel our co-workers are not pulling their weight. This is one thing that can sink a partnership faster than a large hole in a small boat. Business partners are not required to work the same hours or complete the same tasks, but they should feel as though their workloads are in balance and that each partner is happy with the division of functions.

This type of business harmony can be compared to a jigsaw puzzle, where the challenge lies in finding the pieces that fit and lining up the jagged edges to complement each other. This does not mean that both partners need to be the same or similar. We each have individual talents and resources that we draw from. We also all have unique approaches to problems and overall outlooks, partly inspired by our experiences and backgrounds. The key here is in how individual strengths offset individual weaknesses. For example, how do your business partner’s critical talents work together with your abilities?

If done correctly, partnering together creates a whole greater than its separate components. An entrepreneur should be able to identify how adding their partner improves their business advantage—and the reverse should also be true. When you achieve partner harmony within your business, you will make beautiful music together; ideally, profits and revenue will follow.

Remember to Stay Authentic

It sounds cliché, but losing oneself in a partnership can be easy. Especially at first, you will be constantly busy and have many new duties to perform while attempting to keep the rest of your life in perspective.

We’ve discussed the importance of communication, balance, trust, and choosing the right partner. But even if you have found that perfect partner, nothing can quickly erode one’s faith in you than not being your authentic self. Staying in touch with your business partner is essential, but make sure to also keep in touch with someone equally important: yourself. In this age of modern technology, we sometimes spend all our “free” time working online or both. So take breaks, get outside, free your mind of business concerns and technological burdens, and encourage your partner to do the same. Your business, your partners, and your relationships will thank you.

Discuss Shared Goals

Business partners must recognize and identify their business vision and be honest with their partners. Your dreams and goals do not have to be identical, but they must be shared and approved by each other. Likewise, you may have a different five or ten-year plan than your partner, but each of you should be aware of what that is and how the business fits into it. For example, do not wait until later to find out that your new partner only wanted to work hard for a year and then retire for good. Perhaps, while he was banking on selling the business and cashing out, you were already dedicating yourself and your time to a strong ten years of due diligence and growth. This is just an example of how divergent visions should be compared early.

Agree Upon a Business Plan

At this point, you and your partner should be working on a business plan. While it does not need to be finished, the sooner, the better. You should at least be able to draw up a quick outline of your business plan, outlining your goals, employee needs, capital investments, and cash resources and needs. Outlining these business aspects will also help check if both partners are on the same page.

If you have the time before starting the Partnership, finishing the business plan is a great use and should be considered essential. Getting down all of the partners’ specific thoughts on paper will help create an organized guide for your company and answer any questions and problems you have been working on. Starting a business plan is not always easy; that is why it is so important. Let the writing of your new business plan for the Partnership serve as one of the first collaborative challenges for the company. Of course, while the program can be very beneficial as an exercise, it also has strategic value. Once it is finished, you will find yourself returning to it repeatedly throughout the business’s life to check on the completion of goals, make sure everyone is on the same page, and even revise your ambitions and aims as the company grows flourishes. Plan to be excellent, and you will.

Write an Operating Agreement

No matter the chosen structure, a signed operating agreement is essential to all partnerships. Contracts such as this are necessary to help protect associations from disputes. If an argument, for example, comes down to one partner’s claim over another’s, it is easy to reference the contract to see who is right and who is wrong. Contracts usually include, but are not limited to:

A concise explanation of each partner’s duties
The preferred manner of distributing profits
The powers of the partners to conduct business decisions
A clause for dispute resolution
An agreement for a possible buyout
An exit strategy: for example, a detailed description of how partners can withdraw from the company and can also dictate how much notice is needed to leave the business. Also, this part of the contract can detail how the Partnership would handle an unfortunate circumstance, such as a partner dying, retiring, or leaving the company for another reason.
How to bring in a new partner for the business
Other issues that may be important to your unique business.

Do not rush the creation of this document. Instead, take your time and make sure that each partner has a chance to voice their opinions and contributions and go over it before it is finalized. Great partnerships begin and end with excellent, thorough, and inclusive contracts, so do not overlook or skimp on this step.

Discuss Marketing and Advertising

Everyone in the business world constantly searches for the best ways to market their companies, and new business partners are no different. Whenever a startup is set into motion, there is a certain amount of pressure to create profits, generate leads, and meet the goals outlined in the business plan and other discussions. However, there are many ways to go about marketing and advertising, and this is another aspect of the company that you will want to discuss with your partner and nail down the best you can. While you might choose to explore a few options to begin and then revisit the marketing angle later, it is beneficial to see if both partners are on the same marketing and advertising wavelength. You might even want to write a brief list of projections, duties, or simple tasks such as “Partner A works on social media marketing during the first three months” or “Partner B contacts local newspapers during the first six weeks.”

Especially these days, there are so many different categories and approaches to marketing, never mind advertising, that it helps to compare philosophies. For example, if one partner has experience in advertising, let them take the helm. If you have knowledge of inbound marketing, social media marketing, content marketing, SEO or web marketing—or you know someone who does and wants to help—by all means, take the lead.

Also, different goods and services necessitate other marketing plans. Where do you see demand for your products or services, and when do you anticipate it occurring? Run an analysis, be realistic, and talk to some advertising and marketing professionals and firms about their rates if you can afford them. Being able to spread the word about your new business partnership, and better yet, being on the same page regarding how to spread the word about the company, is vital.

Make Strong Decisions

In all business pursuits, executing clearly and concisely is vital. Strong decision-making is critical whether working on daily tasks or business projections for the future. The ability to trust that your partner will execute is also essential. Your business partnership may be doomed if your prospective partner struggles with energy levels, organization, timeliness, and focus. But if your partner executes well and makes critical decisions with dedication and confidence, you are on the road to success.

One note here: making confident decisions is a fantastic quality to have, but strong choices are still made with the help and feedback of your partner or partners. This is especially true in a business partnership, so do not hesitate to solicit feedback.

Write Out an Exit Strategy

Remember the marriage analogy? In the same way that a prenuptial agreement is sometimes utilized before marriages are finalized, business partnerships should plan for the early exit of one or more partners—just in case. In this document, the terms surrounding a partner’s departure are arrived at, so the Partnership has something to fall back on if the time comes. We recommend revisiting this document routinely to check on the terms, as circumstances often change. Maintaining fairness and equity in the document and the business as a whole is essential.

We are not saying your new business will fail; it is far from it. If you follow these steps and work hard, we predict great success for your Partnership. However, sometimes, even the most lucrative companies are not intended to last decades or more. Every business has a different lifespan, months, years, or centuries. Eventually, the time comes for even the most compatible and successful business partners to part ways. Even if the terms are not set in stone, planning for this eventual separation can help make this a manageable and even bittersweet occasion.

Contact a Business Attorney

Starting a small business partnership can be a challenging, enjoyable, and ideally profitable task. We hope that this checklist has reminded you of some tasks you have yet to do and introduced others that you were perhaps unaware of. Since a business partnership has many different facets, it is wise to contact a business lawyer as you start out and before any documents are signed. Encourage your prospective partners to do the same.

A licensed attorney can help individuals stay up to date and informed about the rules and regulations that govern business partnerships in their particular state. We invite you to contact the California business lawyer Nakase Wade for a free consultation regarding your exciting new Partnership. We have helped many small businesses accomplish all the tasks necessary to start the company, and we look forward to finding out how we can help your new small business partnership. We hope to hear from you, but regardless: good luck out there in the business world.

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