It is a tall order to ask for a business owner to manage everything alone, much less lead their business into success. This is why many successful businesses are born from partnerships.

Partnerships can be advantageous to business owners looking to balance their complementary talents and personalities. Sharing the experience of running a business can make the whole process more enjoyable, especially with a partner who is liked and respected.

However, partnerships are not without their disadvantages. Disagreements are bound to happen over time so it is important to formally structure the relationship. To ensure business success and the longevity of your relationship, there are a few important steps to take when laying out the groundwork for your partnership.

Sort out the basics with your partner first
Be sure to cover issues such as:

• Business ownership division. Who owns what percent?
• Decision-making processes. How are business decisions made? Who has final authority? How are disagreements settled?
• Partnership responsibilities. What are each partner’s responsibilities? How much time and money will each partner contribute? Can partners work in other positions at the same time?
• Partnership breakdowns. What happens when a partner wants to sell? What happens when a partner dies or becomes disabled? What happens if you want to bring on an additional partner?

Draw up a written partnership agreement
Solidify all the key issues that you have discussed in a legally binding contract. This is to ensure that parties involved are held accountable to the agreed-upon terms of your partnership. Also make sure that contract is drafted with professional legal advice and assistance.

Choose an appropriate business structure
Discuss with an accountant what legal form your partnership should take. This is important to determine your level of involvement in a partnership. For example, a simple partnership does not provide protection for any party’s personal assets.

Consider a buy-sell agreement
A buy-sell agreement acts as an insurance policy for partnerships in the event that a partner dies or becomes disabled, wants to sell their share of the business, or leaves the business. Buy-sell agreements can resolve disputes or differing goals by transferring business ownership and reducing the risk of business failure after a partner leaves. Always seek professional advice before drafting a buy-sell agreement to ensure all situations are covered and the contract is neither too advantageous or disadvantageous for one party.