If you decide that a partnership is the most appropriate business formation, it's likely that you already have a partner in mind. However, before you form your business and get started, there are several important details to consider.
The work that you put in up front will help protect you against making a bad decision that will impact you and your business down the road.
Here are five details to focus on when choosing a business partner:
- Trust: Can you trust your partner 100 percent? If the answer is yes, you have a solid foundation for going into business together. If the answer is no, it could result in issues in the future. Every good business partnership is built on trust.
- Communication: It's critical that you and your business partner are able to communicate in an efficient and effective manner. If you have reason to believe that you'll struggle to keep an open line of communication, think long and hard about proceeding.
- Responsibilities: One of the biggest benefits of a partnership is that you have two people working toward the growth of the business. Clearly define the responsibilities of both individuals so that there's no gray area as to what you should and shouldn't be doing.
- Money: Are you footing all the costs of getting the business off the ground? Is your partner going in with you 50/50? The answers to money-related questions will help you define the partnership, create a contract and prevent disputes in the future.
- Contract: Even if you're good friends with your business partner, you should still create and sign a contract that outlines all the terms and conditions of your agreement. If you face a dispute in the future, your contract will give you a better idea of what to do next.
With these details in mind, it's easier to choose a business partner without any fear of going down the wrong path.
When it comes to the actual formation of your business, don't hesitate to seek professional assistance. It's important to file the necessary paperwork with both the IRS and appropriate state agencies.
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