Starting a business with a partner can feel like a great idea. At first, a 50/50 partnership might seem like a fair way to share responsibilities and profits. But, without a solid agreement in place, this ideal scenario can quickly become a ticking time bomb.
I’ve seen it happen too many times. Two partners start a business, everything runs smoothly, and then one partner suddenly wants out. What happens next? Without a clear exit strategy, the situation can deteriorate rapidly.
Planning for the “What Ifs”
One crucial lesson from my experience with partnerships is to plan for the “what ifs” from the very beginning. Think about scenarios like one partner wanting to sell, a disagreement over a major decision, or—worst-case scenario—one partner passing away. These situations might seem unlikely when things are going well, but they happen more often than you might think.
That’s why having a well-drafted operating agreement is not just a good idea; it’s essential. Think of it as a business prenup. It safeguards everyone involved and ensures that, even in the worst-case scenario, the business can continue smoothly.
Setting the Right Foundation from Day One
Here’s the reality: don’t rely solely on handshakes and goodwill. Get an attorney involved from the start. Establish clear parameters and, above all, be intentional about how you set things up.
When both partners are committed to the business’s long-term success, setting up these guardrails ensures a smoother journey. It also helps prevent unexpected challenges down the road.
Partnerships can be incredibly rewarding, but they also come with risks. By planning ahead and setting up clear agreements, you protect both the business and the relationship. Avoid the pitfalls of this kind of setup by being proactive, intentional, and thorough from day one. Not only do you protect yourself from failures in business, but you also save business relationships.
Partnerships can be incredibly rewarding, but they also come with risks. By planning ahead and setting up clear agreements, you protect both the business and the relationship. Avoid the pitfalls of a 50/50 partnership by being proactive, intentional, and thorough from day one. Your future self—and your business—will thank you.
CPA on Fire is a full-service CPA firm that specializes in building financial engines for fast-growing, 7 and 8-figure entrepreneurial companies.
We offer far more than just vCFO services or specialized tax services. Our clients are driven, brilliant CEOs/Founders who are achieving great things. We provide companies a top-tier financial team at a fraction of the cost, enabling faster scaling and wealth maximization throughout.
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