Partnerships... enough said right?

[ncsvoboda7]

So I am entering a partnership and have found there is a horrible stigma out there about partnerships. Just wanted to get some input from your own experiences good and bad? Why have you had good or bad luck with a partnership?

[cdhowell]

I think it is ok if EVERYTHING is put in writing first. The duties of each partner, the return expected from each. Who has the final decision of a conflict. As well as an exit statagy.

[ncsvoboda7]

Exactly my point that is how I am going about it and we have had no problems so far.

[weighit]

How you going to protect your business should one of you have a tragic auto accident and someone gets killed or seriously injured? What if one of you get divorced and the ex-wife wants her half? How are you going to protect cash that might not hit the books? If you think your both always going to agree your not thinking this through. When only one person is in charge, that person controls the day to day operation as they see fit. When two of you are there it may become a head butting issue when you disagree on whatever the situation was. It sometimes is hard enough when you have a manager that is head strong and wants things done differently than the owner, let alone when the other has his money invested. You also need to write right at the beginning, how it will be divide should one of you decide right away, or 20 years from now they want out. I went through a lot of this when I was contemplating a partner, decided the only partner I wanted was the one I sleep with, my wife. Even then there were some issues we didn't agree on, but since we were married we always worked it out.

[ncsvoboda7]

Ya but this all can be solved by simply writing it all out and agreeing on it before hand.

[xrac]

Exactly my point that is how I am going about it and we have had no problems so far.

 

No problems so far doesn't mean a thing. How will you react if your partner takes $5,000 out of the business to go on a cruise without your knowledge as mine did? Can your partner accumulate debt that you will be responsible for as happened to a friend of mine? It almost caused him to go bankrupt and almost cost him his marriage. Do you have a buy sell agreement spelling everything out including how the business will be valued? Where will the money come from to execute such a buy out? Are there any terms spelled out? On and on the questions go. How about my friend whose partner skipped the country with $500,000 and left him to face all of the debtors including the IRS. At the age of 40 he was forced to start over at the bottom. It took him ten years to pay the IRS off. The bottom line is I would say that the majority of us on this forum have tried partnerships and almost to a man we regret it. If you have entered into a partnership it is too late for advice. The agreement has been executed and the die is cast. It is what it is and now you have to live with it be it good or bad. People ask questions after the fact for confirmation of the decision they have already made.

[ncsvoboda7]

I'm not asking after I'm working on forming the partnership as we speak and yes that is exactly what I'm doing, paying big money to an attorney to set up a legit partnership that spells everything out before hand.

[ncsvoboda7]

Also if your corporation is set up so that everyone is 50/50 owner of the shares of the business all decisions have to be passed through both owners not just one!

[xrac]

I'm not asking after I'm working on forming the partnership as we speak and yes that is exactly what I'm doing, paying big money to an attorney to set up a legit partnership that spells everything out before hand.

Don't trust just the attorney. I would find an experience business person and run the agreement by them. The attorney we used did not leave us with a good mechanism to dissolve the partnership and we thought he was good.

[ncsvoboda7]

Ya I'm nor blindly trusting an attorney I have a lot of experience and a college degree in business so I am also going over everything with a fine tooth comb.

[xrac]

Also if your corporation is set up so that everyone is 50/50 owner of the shares of the business all decisions have to be passed through both owners not just one!

If you cannot agree what happens then?

[ncsvoboda7]

So say we have a partnership that is properly formed do you guys see pros or just cons in a partnership?

[xrac]

Also if your corporation is set up so that everyone is 50/50 owner of the shares of the business all decisions have to be passed through both owners not just one!

If you cannot agree what happens then? In my opinion 50/50 is the worst because no one is in control.

[ncsvoboda7]

You have mechanisms that determine how to treat a stalemate in a decision.

[xrac]

Also if your corporation is set up so that everyone is 50/50 owner of the shares of the business all decisions have to be passed through both owners not just one!

If you cannot agree what happens then? In my opinion 50/50 is the worst because no one is in control. In my partnership we are 50/50 but I have control because I am named as the operating partner in the operating agreement and as the franchise representative with the franchisor.

[ncsvoboda7]

If you cannot agree what happens then? In my opinion 50/50 is the worst because no one is in control.

It definitely takes the most discipline and I think that is why people dont like partnerships, people partner just to partner and not because they need what the other partner can bring to the table. You simply have to learn how to compromise for a greater benefit in the end.

[xrac]

It definitely takes the most discipline and I think that is why people dont like partnerships, people partner just to partner and not because they need what the other partner can bring to the table. You simply have to learn how to compromise for a greater benefit in the end.

Here was the bottom line for me. I did not need what the other partner brought to the table but "I thought I needed it". The partnership was my way of dealing with my own lack of confidence in myself. The partner was my safety net.

[ncsvoboda7]

Here was the bottom line for me. I did not need what the other partner brought to the table but "I thought I needed it". The partnership was my way of dealing with my own lack of experience and my own uncertainty.

Well said and I guess maybe that could be the case for me too but I guess I will never know until I'm a few years down the road with this.

[xrac]

Well said and I guess maybe that could be the case for me too but I guess I will never know until I'm a few years down the road with this.

The greatest thing you have in your favor is youth. You have time to make mistakes and recover. If you are young enough you can completely fail and still rise from the ashes and succeed. The founder of KFC was completely broke when he started selling his recipe and grew to become a very wealthy, nationally know figure.

[ncsvoboda7]

I would agree although it hurts to think about, but I just pray for the wisdom to be able to make it all work out.

[xrac]

I would agree although it hurts to think about, but I just pray for the wisdom to be able to make it all work out.

Work hard, seek good advice, listen to your wife, pray hard, and trust the Lord. If I had listened to my wife I would not have entered the partnership.

[Jeff]

I have had more than one person want to "partner up" over the years. Most were for self serving reasons. One guy came into a bunch of money and wanted a place to "tinker" on his cars. Another thought that we could expand on the hybrid "craze". The problem I had was none of them understood my business model. I may never be rich but I treat people right. These folks thought we could raise rates and margins, make more money and basically plunder and pillage their way to the top. Its funny how so many people on the "outside" think we are raking in the dough!

[Elon Block]

Nate,

 

You've gotten some great suggestions here. It all boils down to:

What happens if...

 

You say you are meeting with an attorney. Hopefully, it is someone that

specializes in small business partnership arrangements, like you are

talking about, so he/she already has a big checklist of..

What happens if...

 

Here are a couple of real life "What happens if..."

If you are the person in charge of operations and you want to purchase an
alignment machine? Or hire or fire an employee...

How is the decision going to be made?

For example...
My wife and I are business partners and we have clear guidelines we have

developed that help us make the decisions for both of our businesses.

On some things, she has the final say. On others, I have the final say. These

guidelines are based on our individual strengths.

 

So, partnerships can work exceptionally well as long as clear expectations are

set in advance.

 

[John Pearson]

Nate, Like XRAC said you have youth on your side. Trust me I wish I had someone with a bag of money backing me though the addition and expansion that I am going through right now. But at the end of the day when you can sit back and say that I did all of it, I made it happen and it's MINE, thats pretty cool.

Dont be afraid to fail, success is even more scary.

[Hands On]

Ya but this all can be solved by simply writing it all out and agreeing on it before hand.

ya I mean just like a treaty right, those always make everything better at that point.

 

The point is at some time there is going to be a conflict and you cant just pull out a peice of paper and expect both parties to go " oh yeah, silly me, i forgot about that" and the problem magcally goes away. And to say that there will not be any problems is to play ignorant. Some of the best marriges end in divorce.

 

Now I am not wishing the worse for you, but by preparing for the worse, we can usually end up surviving it. It is just that a partnership is in my opinion already starting out in a pretty bad spot and there is not a long fall to the worse that can happen.

[Hands On]

So say we have a partnership that is properly formed do you guys see pros or just cons in a partnership?

Only cons, if you consider financial assistance a pro then your getting your financing the wrong way. If you see the partner as a pro because he is going to be an employee? he is not an employee, he is a second business owner. One thing that might help is if you described exactly how this partnership is going to function. Are you both mechaincs? Are you both going to be present and working. How much do you both expect to pull out from the business, and how long do you both think it will take to make that money. Are you both depending on this business to pay both of your bills? What do you envision the pro's to be?

[xrac]

http://albertaventure.com/2007/07/when-partnerships-go-bad/

 

http://www.ihatemypartner.com/

[ncsvoboda7]

I want to invite you all to follow me through the process as I blog my expansion and partnership. Follow us at https://www.facebook.com/groups/498885236930554/

[ncsvoboda7]

And please post, please comment and give us all the wisdom and advice you can spare thanks!

[weighit]

Many of us do not use face book, so your probably going to have to post here all your trials and tribulations.