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How Do I Bring Partners into the Business?

I have come to a point where I need more people to help me install renewable enery products in Mexico. One of the people who wants to partner with me is a good friend but he has a friend with a lot of money, which sounds good but also worries me. How should I prepare myself to manage my business 100 percent while allowing others to invest but be second or third in command? What legal consideration should I make?
Nina Kaufman answered July 28, 2011
URL: http://www.entrepreneur.com/answer/222347
Business partners can be hands-on or passive investors, so the first thing you need to determine is which kind of partner you want.

Do you want someone local in Mexico? Do you want someone who will assist you in an active management capacity? Or do you want someone to provide you with boatloads of money so that you can hire more staff? One size does not fit all, so you want to get clear on what you need to accurately assess whether your potential "partners" can provide it.

Friends don't necessarily make for good business partners. You will want to carefully screen anyone you let into your business. Ask for credit reports and do background checks. And, yes, even with your friends.

In fact, especially with your friends. If you want to maintain your friendship, be even more vigilant about handling your business dealings and a professional manner.

Beyond that, be sure that you have a business entity that can accommodate different categories of owners. An S Corp will not give you the legal flexibility you need -- bringing in passive investors is best accommodated through a limited liability company or a C Corp.

And always have it done in writing. A qualified business attorney can help you navigate the variety of business partnership issues you will want to address.

Related: How to Find the Right Investor for Your Business
Related: 10 Steps to Organizing an LLC

Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.