You and your friend have decided to go into business together, and you have both opted to split the management of your company equally. Sharing expenses and responsibilities of operating an enterprise is one of the many benefits of a successful business partnership. When two or more individuals with different skill sets and resources come together, they can leverage each other’s capabilities and connections to achieve a common goal.
A partnership could, however, also inspire certain challenges and put undue stress on your friendship. Partnerships have certain drawbacks, including the fact that each member of the partnership often bears unlimited liability for their actions within the company. Therefore, it’s important to thoroughly assess any potential problems that you may encounter before formally creating a partnership with your friend.
Potential partnership pitfalls
The following are potential problems that could harm both the company and your relationship with your business partner, if they are not properly accounted for ahead of time:
- Failing to set clear boundaries between friendship and business. If you let personal matters interfere with work matters, your friendship and business might suffer.
- Moving forward without a written contract in place. It’s better to take the time to create a contract that clearly outlines your business operations before you and your friend make the partnership official. Also, do not forget to discuss how you will handle any future disputes that may arise.
- Failing to create an exit strategy. It’s important to have a clear plan in place to ensure that either partner can vacate the partnership if they wish to do so.
Before forming a partnership with a friend, it is important to discuss how you will share decision-making duties and seek assistance before signing a contract. Making this effort now can help to ensure that your interests are protected later.