Choosing a business partner is tough. It requires a great deal of trust. Friendships can be broken by problems in a business relationship. If you decide to take on a partner, make sure you are doing so for the right reasons and that you are prepared for the pitfalls inherent in taking a partner.

A partnership is easier to cope with at tax time than a corporation. You have fewer rules to deal with than a corporation does too.

You must be able to completely trust your partner. Anything one partner agrees to for the business binds both of you, so you don’t want someone who will have or cause problems with that.

You need a well-written agreement with your partner, clearly spelling out obligations and roles. If problems arise, this is how you will cope with them legally. Don’t think that just because you’ve been friends with your partner for years that you don’t need an agreement. You’re betting your friendship.

What kind of questions should your partnership agreement cover?

Who controls the company?
Who provides funding?
Who gets what share of profits?
If one partner invests more money, do they get more control?
What are the duties of each partner?
Other details important to the partners.

You don’t necessarily have to hire a lawyer to draw up an agreement. You should definitely know what each of you wants in the partnership before having a professional draw up your agreement if you decide to use one.

The disadvantage of taking on a partner primarily deals with the fact that if your business has problems, both partners are liable, no matter whose fault the problem may have been.

There are some times that are more likely than others to cause a problem. Many are the major stressors of life: Divorce, medical issues, financial stress (either within the business or for only one of the partners) can all ruin a partnership. In addition, a change in the relationship between partners or one partner trying to bring someone else into the business.

A partnership is not the answer for every business, but it has some advantages for some businesses. Take the formation of a partnership very seriously and consider the potential pitfalls before you get started.

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