Dot your I’s and cross your T’s when it comes to inviting someone into your business
By Craig Falck for Africa Report
Photograph: © Bowie15 | Dreamstime.com
Having a business partner can be a really good idea and taking on another person in the business can yield tremendous results that you would never have achieved without the partner. However, you need to be extremely careful when signing the partnership agreement, as not every partner turns out to be the business saviour that they first appear to be.
It’s your business, so you need to maintain bargaining control. Do not let your potential partner dictate terms and conditions, regardless of how badly you need them. Get a lawyer or your accountant involved in drawing up the partnership agreement – these are legal documents and these types of professionals work with them on a daily basis, so they will know what they’re doing. It’s important to make sure that you are 100 percent satisfied with the agreement and all of its clauses before signing on the dotted line. If there’s something that you don’t like the sound of or want to amend, do it. What you’re paying your lawyer or accountant to draw up the partnership agreement is peanuts compared to what you could make if the partnership works or lose if it blows up in your face.
When deciding on clauses, you need to make sure that you maintain control over the partnership. Don’t give the potential partner more than 45 percent of the say or stake in the business. The last thing you want is to be challenged when it comes to decisions about the business and how it’s run. If your potential partner isn’t happy with the partnership agreement, discuss the various remedies with your lawyer or accountant. If they are satisfied, amendments can be made, and if they smell a rat, they can also shut down the negotiations early.
You also need to do background checks on your wannabe-partner. Don’t just accept the first Tom, Dick or Harry that comes along because they have the necessary funds. Find out more about their business history, their reputation and how they work – this might be tricky but it’s an important step that needs to be taken. If you, at any stage, feel worried about taking this person on, walk away. The important thing when signing up a partner is that you, as a person and the business owner, are thoroughly happy with who you will be working with.
You need to remember that no matter what your reasons for taking on a partner in your business, you are never desperate enough to do something that you don’t want to do or feel uncomfortable doing. Bringing someone into your business needs to be a certainty, and you need to believe in the agreement that you sign. If there’s a single letter that you feel is out of place, change it. You’re in control, you’re the boss, you’re the one making the decisions – don’t make the mistake of signing the wrong partnership agreement, because it will cost you.
