To conclude this series of topics about partners in business we will talk about some specific aspects to guarantee that a society really works.
Simple as these tips may seem, I can guarantee that following them carefully can make the difference between a small company that starts out weak and trapped in problems or a company that steps towards success from the beginning.
In the first part of this series we talked about how a well-structured society can be a blessing and bring many benefits, while on the contrary, a poorly formed society can be a kind of “curse” (to put it colloquially) due to the innumerable problems represents.
In the second part we talk about the qualities that the candidate you are considering should have to be your business partner and in this last and final part we will talk about the specific details of how to formalize your partnership and fair models for the distribution of profits and responsibilities.
Of course, having established the previous points, we will present the following under the premise that you have chosen work with a business partner in business, which, as we’ve already emphasized, if done properly, can be the real secret to success.
1. Clearly establish the expectations of each of the partners involved in the business
Define what they expect from the business and how much they are willing to get involved in building it in the medium and long term. At this point, the figure of each partner in the company must be established. It must be defined whether they will be capitalist partners, employees, or both.
2. Establishes what each of the partners will contribute to the company
Since not everyone contributes the same, it must be made very clear from the beginning who and in what dimension they will contribute:
- capital (in cash or in kind)
- knowledge
- weather
- workforce
- intellectual property
At this point it is essential to give the appropriate value to each of the contributions because although everything is important, you cannot give the same monetary value to everything. It is here where what each one hopes to receive must be clearly spoken and the only way and the fairest way to determine it is by speaking.
Justice is a subjective variable that will depend on the interests, vision and even the level of friendship that the partners may have. (Remember that sometimes your partner can be your wife, a good friend, or your brother!).
For example, for one type of business, one partner could contribute the capital and another the labor and share their profits 50-50%. However, in another business model, the same formula, as it requires more capital or greater risk, could be distributed 60-40%. This is something that is only determined by the partners under their own values at the time of undertaking.
Another example may be the case in which one partner contributes machinery and another contributes capital and together they hire a third person who will be a employee in charge of operating the business. Similarly, they must reach an agreement on how much they expect to receive in profits.
Key principle: speak everything clearly from the beginning, come to an agreement and put it in writing.
If there is no agreement or the issues are not clear enough for the partners, it is best not to take the next step until an agreement is reached. All the topics must be exhausted, even the most difficult and complicated, because in any case it is better to stop here than start the trading company with annoyances, disagreements or a sense of loss that can only get in the way of starting the business.
3. Make a Commitment in Writing
The third and final step is surely the most important of all and the one that most entrepreneurs regularly skip for various reasons. Some omit it because of the friendship and trust they have with their partner and mistakenly assume that leaving an agreement in writing is like “mistrusting” that person.
Nothing could be further from the truth because the very fact of formalize a partnership Through a contract it is the best way to strengthen and give confidence to the relationship as it represents that you recognize, respect and value the rights of the other person, and vice versa.
Others omit the agreement in writing because they think it is “not necessary” or because of the costs that it may represent, however, this perception vanishes as soon as the challenges of building a company and suddenly you feel as if you are working “alone” and your partner does not contribute what you think he should have contributed.
And then they face the monster that can destroy any company: assume that things had become clear or that your partner should have fulfilled or interpreted what you think he should have interpreted within the framework of the investment of time, money and commitment to the company.
The Agreement
The partnership contract or agreement between partners is nothing more than a document that can be one sheet or the size you want where the different commitments, contributions, functions and responsibilities that each partner will have within the company are established in writing.
It should outline something like:
“On September 1, 2012 in the City of XYZ, we Obdulio and Sebastián, agreed to start our company dedicated to the manufacture of ABC Products and for this we decided to form our society based on the following clauses:”
A. Member contributions …
B. Commitment of the partners …
C. Profit sharing percentages …
D. Conflict resolution …
This can be a private document that the partners must print and sign and it is advisable to request the authenticity of a lawyer to give it legality and to serve as a basis for the formal constitution of the company as a public limited company.
This document is also a protection mechanism to be able to claim any right at the time it is necessary. And the best of all is that this is the best memory that exists so that later nobody can say that they “understood it differently” or that it was “not clear enough”.
Thus, building a society with formal terms such as those set out here will not only give your business a great push out, but it will help you to better preserve your friendship with those people you value so much and of course multiply your income to the maximum.
What to do if you have chosen a wrong partner in your business?
Of course, even with everything, there is always a chance that something will go wrong. The character of the people, the changing circumstances, the personal interests, the diversity of opinions, the risks of the business and an endless number of variables could cause you to wonder at any given moment if it is worth continuing with the partner that you chose.
And the answer is very simple. If things are not going well or you are not comfortable with the way society is walking, it is simply time to stop and make decisions.
The first thing is to talk to your partner, put the issues on the table and decide if you want to continue working together. If this is done on time it is very likely that you will be able to save the friendship although in some cases it can also be complicated.
If the answer is negative and they prefer to dissolve the company, then another kind of agreement will have to be made. dissolution of society which is somewhat more complex than the first and which we will talk about in a later post.
Of course, this issue is much more complex as more partners are involved, however the principles are the same.
Let me know about your experience in a comment, what would you contribute to the topic?
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