Starting a business with others is often an exciting time, with both parties working hard to establish a business that they passionately believe in.
While it may be rewarding to work for yourself and nurture your own business, it is important not to overlook the more mundane and practical aspects involved in owning and operating a business with another person/s.
Some things you need to consider are:-
- How are the initial set-up costs to be shared?
- Who will be responsible for the initial financial contributions and who will be responsible for any ongoing financial costs.
- How are profits to be shared?
- How are risks and losses to be managed?
- How and when will payments be made to each owner.
- What is expected of each owner with respect to hours committed to the business?
- What type of input is expected from each owner taking into account each owner’s unique skills, experience and preferences.
- What happens if one owner contributes more time/labour/resources than others?
- How are important decisions to be made?
- How are conflicts between the owners to be resolved?
- What happens in the event of disagreement between the owners about issues relating to the business.
Hiring and management of staff
- How will hiring of staff be handled?
- How will staff be managed and duties allocated?
Keeping records and administration
- Who is responsible for keeping relevant records?
- Who will perform administrative functions?
Retirement or death of a party
- Consider implementing appropriate strategies (such as buy-out arrangements) to address issues such as the death or retirement of an owner or buying out an owner who is in conflict the with majority of the owners of the business.
- Sales and marketing;
- Other relevant issues.
It is recommended that these issues be discussed and dealt with before starting your business and the arrangements of your agreement should be put in writing.
Depending on the business structure you have chosen to operate from, this may be achieved by a:-
At the start of negotiations you may also need to implement a:-
It makes sense to ensure that all parties are in agreement as to these practical but nevertheless important issues which may arise during the course of the business.
Agreeing on these issues in advance ensures everyone involved is operating from the same page before they start investing valuable time, money and energy into progressing their shared business vision.