Perhaps because of the uncertain business climate, more people are deciding to pool their talents and go into business together.
Their entrepreneurial impulse is to be applauded. The advantage of going into business with a partner is being able to make the most of shared resources and complementary talents of others in a new enterprise.
But going into business together is more than just two people with complementary talents "teaming up" to work together and there may be legal implications.
Over the course of my career, I've been personally involved with a number of good partners, but I've also learned some valuable lessons from arrangements that didn't turn out so well.
One of my initial partnerships went sour as a result of my partner obligating our company for services I knew nothing about. In the end, this was my first real experience in "business divorce," that not only cleaned me out financially but also made me liable (as a partner) for the agreements my partner had entered into without my knowledge or consent.
In time, I was able to pay off all my liabilities. But that experience made me aware of some things I had to ask for and get on my own terms the next time I teamed up in business.
Consider if the following if you're looking into going into business with another person:
1. While partnering up can be a great way to leverage existing resources between parties, a poorly written and researched general partnership agreement can open you up to personal liability issues. It's a good idea to hire an experienced lawyer to help form your company.
2. Sharing resources can be great, but it can come at a price. While a 50-50 split of profits, for example, may sound like fair compensation at the start, sometimes resentment can emerge when partners start divvying up the profit and tracking it back to individual workloads, efforts and results. Decide from the outset the roles and responsibilities each player will have, how they will resolve disagreements, and who will help serve as a mediator to settle issues and reach a win-win solution.
3. Most people team up based on a personal friendship or co-worker relationship. To thrive, a good partnership should be grounded in business and treated as a business relationship. Even if an owner is "silent" or there is a 70-30 or 80-20 split, values, goals and personalities need to be aligned toward profit.
Before beginning such an arrangement, figure out how you'll hold one another accountable for results. What reporting or objective indicators will be used to measure and track performance? How will value -- in effort and results -- be monetized and measured?
4. A business venture can be structured for any amount of time (as long as the owners are still alive), but they should have a vision for how it will grow and expand over five, 10, or more years. It's advisable to build in a flexible, win-win exit strategy for each player if needs or circumstances arise.
5. A business, like certain marriages, requires a pre-nup. The reality is that it's not a matter of if, but when you'll decide to go their separate ways. You need to prepare for that scenario and have a document as part of your agreement that outlines what happens when one or more people leave. How will they be compensated? How will resources be divided? How will clients be served?
6. Any successful company needs to have one person in charge. So, the decision of who is responsible for day-to-day company direction needs to be made early on, and everyone in the partnership needs to be 100 percent clear on their roles, duties, and responsibilities. This involves communication and a certain amount of planning.
The temptation is great in today's market to share talents, equipment, expenses, or crucial business relationships. Just make sure you do the legwork and hard decision-making up front to assure that your business will pay off in the long run.
The author is an Entrepreneur contributor. The opinions expressed are those of the writer.