This article originally appeared in the spring 2023 issue of ICONFIT Magazine.

Starting a business can be scary, but it can be a lot easier going into it with a business partner. Not only does working with someone else make it easier for you to run a successful company, but it also helps reduce your liability in case something goes wrong. There is some risk associated, though – especially if you go in without a plan to protect yourself and the business.

Business partners work together to run a business. They can be shareholders, managers or employees. Either partner can run the business, be completely silent, or anything in between. Some partners only provide money, and some partners only provide sweat equity. Partnerships can be formed between individuals or companies and may be paid or unpaid. There’s a wide variety of ways to structure a partnership, and it’s best to make sure you explore all options and work with an attorney to create a partnership agreement. The partnership agreement will be the most important document in the business.

Legal responsibilities

Business partnerships indicate that both parties are responsible for the business. This means that if the company goes bust or owes money to someone, you’re both on the hook for it. Your business partner is also liable for the debts of the business, and their responsibilities include paying back what is owed if their funds can’t cover creditor costs. The same applies if another creditor tries to recover their losses from anyone else involved with running the company.

Aligning visions

As a business owner, you need to make sure that you and your partner have a clear idea of what the business will do and how it will be run. You should also understand the other person’s goals and expectations. For example, if they want to build an app that helps people, but all you care about is the bottom line – or vice versa – then your visions and goals do not align. These terms should be clearly defined in the partnership agreement. If one partner wants to change the direction of the business, the partnership agreement should govern how that can be done under the current business.

If things sour

What should you do if your business partnership takes a turn for the worst? Believe it or not, it can be harder to get out of a business partnership than a marriage if not structured properly. If you’re going to start a business with someone, you need to know what you’re getting into. This means making sure that the other person has the same goals as you and can be trusted, and knowing their strengths and weaknesses. If they don’t have experience in some aspects of the business, are they willing to learn? Are they good at communicating? A partner who is slow at responding or doesn’t take action quickly when needed may not be a good fit for your business.

Choosing a business partner

When choosing a business partner, it’s important to find someone who will be an asset to your company. Here are some things to consider:

• Trust. The most important aspect of any partnership is trust. Your partner should be able to be relied upon when things get tough.
• Similar vision and values. You don’t have time or energy for miscommunication or disagreements in this kind of situation – you need someone who shares your ideas about how the business should work and how profits should be distributed among its members (if there are multiple partners).
• Similar work ethic/dedication level. If one person works harder than another, or has more drive than their counterpart(s), this could lead to resentment within the team over time. If possible, try finding people with similar work ethics so everyone feels like they’re contributing equally.
• Their reaction in negative situations. It’s easy to see the bright side of things when business is going well. If not, you wouldn’t be in this partnership, or at least considering it. Before you enter a business partnership with someone, you want to ensure both of you can handle each other in negative situations. What happens if things go wrong? What happens if you have a falling out? What if one partner wants to leave the business, or becomes incapacitated? These are all questions that should be answered in the partnership agreement.

Great partnerships can make all the difference in your business. They can provide you with a built-in confidante who shares the responsibilities, costs, and efforts, along with the wins and successes. And keep in mind that you may not need to be two-peas-in-a-pod with your partner – just like relationships, some of most complementary pairings can come from unexpected sources. Diversity in thinking and skillsets can ultimately make your business stronger – but you’ll need to know how to navigate it and protect yourself, and your business, if things go sideways.