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Entering a business partnership? Make sure you set out the rules

Fred without Ginger, Thelma without Louise, Ben without Jerry. No matter how great you are, sometimes two is better than one. Whatever your line of business, having a great partner can elevate you from good to amazing. However, having clear rules when going into business with someone is essential.

What are you each putting into your relationship?

Agree on and document what you each expect of each other. This covers your financial input as well as the skills you bring and the amount of time you are going to put in. If one of you has other commitments and can only work a few hours per week on the business, while the other is free to work seven days a week, this could easily lead to ill-feeling, unless you carefully define it.

What do you expect to get out?

You should also define how you intend to distribute profits from the business. One of you may want to take out dividends, while the other may wish to invest any profits back into the company.

What’s the plan?

Having a great business idea is one thing. Knowing where you want to take that idea, in two, five, 10 or 30 years, takes a lot more thought.

Who has the final say?

You will not always agree. Who gets to decide if you want to turn left and your partner wants to turn right? If you do not have a plan for this, you could find your business is left sitting at the crossroads while others pass you by.

How does the partnership end?

Do you have an exit plan to allow one of you to leave gracefully? Thinking about it could avoid a bitter legal dispute later.

Starting a new business can be an exciting, fast-moving time, and it can be easy to forget to lay down clear rules. However, doing so now, and creating a partnership agreement could save a lot of problems later.