If you and a colleague, a friend, or a family member have long talked about starting a business together, stop the talking and do it! Take the plunge and create a startup together as equal partners.
When you do decide to start a business with another person, no matter how close the two of you are, just know that it isn’t necessarily going to be plain sailing. You will face more difficulties than the average new business owner, mainly because you’ll always have to come to an agreement with your partner on every decision that is made. Tensions will more than likely rise, troubles will undoubtedly arise, and your relationship will be tested.
To ensure that you, your partner, and the startup that you share together are protected when you go into business together, make sure to check out the advice below.
Decide on your partnership type and stick to it
Right from the get-go, you and your partner need to decide what type of partnership it is you wish to share together. There are a number of types for you both to choose from:
General — this type of partnership entails both partners owning the same amount of the business, and it sees them both involved in the day-to-day running of it
Limited — this type of partnership sees one of the partners be liable for the business only to the extent of the financial investment that they make in it
Limited liability — this type of partnership ensures that both partners are neither responsible or liable for the actions of the other person, especially when it comes to misconduct
It’s important that you set your stall out right away with regards to the type and manner of the partnership that you and your partner wish to share together. Doing so ensures that everybody knows their place, role, and obligations in the business. What’s even more important, however, is that you stick to the type of partnership that you agree upon. In the interest of retaining a relationship with one another, neither of you can stick your nose in where it is neither wanted nor necessary.
Take out key man insurance
Key man insurance is vital for partnership businesses. By taking out this type of cover, both you and your partner will be able to be sure that, upon the unfortunate event of either one of you passing away, the business will be covered financially.
In short, the business will pay the premiums for this insurance type, and it will act as its sole beneficiary should one of you pass away — this will cover any financial losses that your business incurs when it comes to paying corporate debts or spending on future recruitment. Also, the surviving partner will also be able to use the death benefit to buy out their late co-partner’s share.
If you want to start a business with a partner, then you need to take the above advice. You need to set your stall out right away with regards to the type of partnership that you share, and you need to cover yourself with insurances to ensure that your business remains financially stable no matter what.