Jeff Olson started Velocity Business Publishing in 1997 with one partner and soon took on another. For the next five years, the business grew, sales increased and the partnership prospered. But then sales slumped, the business struggled and the partnership cracked. The 46-year-old entrepreneur bought out his partners in the Middlebury, Vermont, publisher in July 2003 and now says, "I'll never go into a partnership with anybody again. I'm going to be in charge of my own thing."
Olson's experience is one that many people considering starting a business need to hear about. Lured by the promise of companionship, the hope of sharing financial and decision-making burdens, and the potential for synergy with someone who has complementary talents, entrepreneurs by the millions decide that starting a business with a partner is far better than going it alone.
The good news is that when it works, it works well. "Companies that start out with partners tend to be the most successful," according to David Gage, an Arlington, Virginia, business mediator and author of The Partnership Charter: How to Start Out Right With Your New Business Partnership (or Fix the One You're In). Unfortunately, according to Gage, many partnerships fall apart after a few years.
That doesn't stop people from forming new companies with partners. There are more than 2 million businesses organized as partnerships, according to the 2003 Statistical Abstract of the United States. Yet that probably vastly understates the popularity of going into business with someone else, says Denis Clifford, a Berkeley, California, attorney and co-author of The Partnership Book: How to Write a Partnership Agreement. Many businesses that are legally corporations are, in fact, run by two or more partners who share ownership, decision making and finances equally.
Whether an S or C corporation, an LLC or professional corporation, businesses run by de facto partners have many of the same advantages-and face many of the same issues-as by-the-book partners do. If you live by the partnership, you can die by it, too. "The basic human realities are the same, whatever form of organization you have," says Clifford. "And they're the most important."