Starting a Business with Partners

by Jose DeJesus MD on December 17, 2008

Here are some thoughts about how to prevent your business from taking over your life by including well-selected co-owners:

You set out to run your own business to gain more independence and for the opportunity to realize the income possible as the owner of a successful business.  If you are spending every moment running your business, at best the profits are sitting in the bank and you are too tired to enjoy the benefits of your labor.  This does not have to be the case.  By setting up a business so that it can run without you, you free up your time and energy. One of the best ways to accomplish this is to bring one or more trustworthy people into the business.

Silent vs. Active Partners

It’s important to understand from the beginning which owners will play an active role in OPERATING the business, which ones will be passive investors, and what types of decisions will involve the passive investors.  Be sure that your operating agreement has a mechanism for resolving tie votes, stalemates, and other conflicts.  If there is a deadlock on a key decision, and no mechanism in place to resolve it, your enterprise can be transformed from an operating business to a court case.  Having a board of directors or advisory board can be helpful, as long as all the owners believe that the board is objective and not biased in favor of one of the owners.

Sharing both Burdens and Rewards

Bringing a trusted partner or partners into your business has several benefits.  In using the word “partner”, I mean co-owner rather than recommending that your structure your business as a partnership.  Besides freeing up time for you, it will also offer you peace of mind to know you have someone who fully understands the business and will work to make it succeed.  After all, your partner has as much to gain or lose as you do.

Going into business with co-owners will help ease the financial burden on both of you by dividing the size of the capital investment required from each owner.  Having co-owners can also allow you to create an exit plan if you are disabled, retire, or die.

Finding a Good “Fit”

When considering including one or more co-owners in your business, try to look for individuals who share your basic business principles and philosophy.  Make sure you choose partners who have the ability to work effectively on their own and set down in advance the rules and methods everyone can agree on.  This way, you can rest assured that no matter who happens to be on location on any given day will be working in a manner consistent to the original business plan.  Clients should not be able to see a difference from day to day.

A Word About Agreement

While it is essential to the success of the business that all partners can agree on the basic operations, it can be detrimental if all partners give in to just one.  You want to involve people who have skills that complement yours and you theirs.  One person can’t be perfect in all areas.  Find partners who can enhance the business by providing skills you may lack and giving feedback on what they believe is working.  Listen when they have ideas on how to change what isn’t working.  You want partners you can feel confident in working with, knowing that want only the best for the business.

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