7 Ways to Protect Yourself in Business Partnerships
- Written by Briony Watts
A business partnership has its advantages since it allows each party to contribute and share the risks in the business. If you start a business with partners, sometimes it can ease the stress that's involved in the process. This is because you will have people around to help you make important decisions. With partners, you can be sure things will be okay even when you aren't around. This article shares important tips on protecting yourself in business partnerships.
1. Know Your Partners
The problem with a partnership is that it takes time to know someone well enough. Maybe you have done many things together before, but you don’t know their style of running a company. Before you begin working together, be sure to understand the other person’s worth ethics.
Building a business from scratch requires a lot of sacrifices. Your partner should be someone willing to work 14-16 hours a day. Unless they can do that, your efforts might never materialize.
2. Be Safe from Partners’ Debts
In the agreement, there has to be a limit of debt each partner can link with the business. Unless you do that, bad debts might weigh down your company. Each time the partners want to take some debt and link it to the business, you must know about it.
Insurance policy is important for your business. But most partners think insurance policies are expensive. In that case, seek insurance coverage and find other ways to pay for the policy. When starting the company, including a commercial insurance policy as part of the plan.
3. Have an Exit Strategy
The best way you can protect yourself from the partnership is by having an exit strategy. In the partnership, you will define what happens in case a partner dies or decides to exit the business.
For instance, the remaining individuals might be able to buy the interests of the leaving partner. Be sure to agree on the buy-out terms so that your partnership runs fairly.
4. Stay Professional
Even if you intend to form a partnership with friends, don’t forget to consider important factors. A company requires high professionalism to succeed. As such, go through your partners’ educational background and resume.
Credentials are important because investors will also look at them when deciding to work with your company. After partnering with your friends, keep the business safe by looking at everything professionally and objectively.
5. Use Your Assets
Partnerships have a lot of challenges, and it might seem great to share your assets with partners. While that might seem like a great way to keep the business running, it has some disadvantages. For example, your partners might mishandle your assets.
When starting a business with partners, you must state firmly that everyone must use their assets. That way, everyone will be sure that if they mishandle the assets, they are the ones who will suffer the consequences.
6. Ensure Proper Accounting
To protect your interest in a partnership, be sure to keep tax and accounting information up to date. Cases of partners embezzling funds from companies are common, and you don’t want to be a victim. Some partners might also find sneaky ways to breach the contract and act in their interest. Unless you keep your records clean, these things can happen for a long time without your knowledge. If you are not good at accounting, hire an expert to help with that department.
7. Have an Experienced Lawyer
Some sites provide you with protection against risks involved in partnerships. For instance, you can click this link and access the new publisher sign-up. Aside from that, be sure to contact a lawyer to help you with the legal process of keeping the partnership safe.
Each time there is a problem in the company, the lawyer can help you understand your legal rights. The law practitioner will also review the contract to find out that everything is clear and fair.
Closing Thoughts
If you want to go into business with friends, don’t rush into it. You should consider these important factors that will help you to be safe in your partnership. You can also get a lawyer to review the contract and advise you on how to handle certain risks. All the best!
