Should I do a background check on a potential business partner?

On Behalf of | Oct 3, 2023 | BUSINESS & COMMERCIAL LAW - Business Formation & Planning

Establishing a business partnership is a serious commitment, possibly lasting years or decades into the future. You may quickly learn about a potential partner by reading their résumés and other documents. Other times, these details are not enough, making you feel compelled to do a background check on them.

This procedure might feel excessive at times. Still, it is a vital part of risk mitigation, especially if you have a lot hinging on the partnership. It does not mean you distrust a potential business partner. Instead, it is part of doing due diligence during the business formation stage, allowing parties to learn about major and minor concerns that could impact the partnership. If you believe it is necessary, you should request a background check because it can benefit all parties in the long run.

What findings are concerning?

There are specific findings that you should look out for after the background check, including the following:

  • Money problems can affect the partner’s financial ability to contribute. This detail could also risk the financial aspect of the partnership, primarily if the issues stem from a lack of organizational skills and discipline.
  • Ethical concerns that may impact the business’s dynamics and image. This information includes scandals, lawsuits and other issues that could affect their integrity. You may also find inconsistencies referencing their professional experience, references and employment history.
  • Personal issues can influence their commitment to business obligations. Being part of a partnership requires giving time and effort proportionate to their stake in the business. The pressure and responsibility might become too much if they have ongoing significant life crises.

These issues are concerning but not grave enough to disqualify a potential partner. Instead, they can be considerations during discussions and negotiations if relevant to the business’s future.

Making decisions based on facts

The purpose of a background check is not to find flaws in a partner candidate. The goal is to gather any information that may impact deliberations and adequately address issues as they arise. Having all the facts can help parties discuss and make informed decisions to protect the business from preventable risks.