By Bert Seither, Vice President at 1800Accountant
About the author: Bert Seither is the Vice President at 1800Accountant, the nation’s leading accounting and consulting firm for small businesses. Seither has assisted thousands of entrepreneurs to find prosperous paths over the past 10 years.
Bringing on a business partner to a small business can be a difficult yet extremely beneficial decision. In some ways, it is like hiring an employee with an integral role, but there are so many more details that must be covered. Check out these helpful hints on finding the right individual to join you and building a relationship that can help your business soar:
-- Determine the specific roles of this business partner
The first step to take when considering bringing on a partner to your company is to clearly lay out exactly what this individual could do to benefit your small business. Create a detailed list of tasks your potential partner would be responsible for each day and how this would benefit your business. It is always wise to nominate someone whose strengths are better than yours in certain areas. It may be difficult at first, but joining forces with a professional who doesn’t always agree with your thinking is a smart move as well. When two such heads like these come together, it can result in a match made in heaven to help your small business achieve all the potential it has.
-- Make sure you completely trust this person
An extremely important ingredient to successfully working with a new partner lies in one simple term –trust. You have to be honest with this person, and the same must go for your partner. Finding a person you can trust typically comes with a proven and lengthy track record. It’s also based on top-notch references and someone you get along with from a personality standpoint. Remember, though, that it often takes time to build up this trust, so be patient upon adding a partner. Only rarely will such a working relationship start to click right away. Plus, there are countless important decisions involved when running an enterprise. To trust that your business partner will make the best decisions with you, it could take a little time to ensure that this other person is fully comfortable and fits in well to your business.
-- Shy away from friends or family members, if possible
It can be easy to bring on a brother, a best friend, or even a spouse as a partner. However, it’s not necessarily the greatest idea. Even though many family-owned small businesses have been successful over the years, decisions that entail finances are often best made between working professionals who have no major connection in their personal lives. This is because if a startup company goes bankrupt, it could seriously damage a personal relationship. In many cases, it simply makes a lot of sense working with a person you don’t live with or spend lots of time with on the golf course. This will ensure that both of you are keenly focused on your professional doings. It also helps draw a bigger line between your personal and small business activities.
-- Know what the financial and tax implications of such an addition are
If you have a sole proprietorship right now, you will more than likely have to modify its legal structure to a business partnership when adding a partner. Bringing on additional members to an LLC or partners to a corporation can greatly affect the financial aspects and tax implications of these small businesses. Seriously consider whether a business partner would positively influence your company from these perspectives. Keep in mind that you may have to have some patience to take on a new tax structure for the company, and you may have to hire an accounting professional specializing in business taxes for assistance. Additionally, sharing profits on a fair basis is a significant part of working with a partner. Make sure all partners are receiving adequate compensation, and brace yourself for some potentially uncomfortable situations with regard to finances. These situations should diminish over time, though, as all the kinks get worked out, and the two partners fully understand each other.