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When people enter into a business partnership, they do so with a lot of optimism and hope that the business will expand and that they’ll both benefit financially. The fact is that even if they do make money, it’s usually a long process that resembles a roller coaster ride. During this process, memories of what constituted the original partnership can and do change. Here are some simple tips to help ensure that a business partnership gets off to a good start and can stand the test of time:
1. Put the terms of the partnership in writing. This should be done as soon as two people agree to become partners and start a business. You cannot rely on memory because everybody remembers things differently and tends to lean toward whatever yields the best result for them.
2. Be specific about the terms of the contract. Include details such as salary, partner draws, individual and partner responsibilities, and even how to deal with disagreements.
3. Review the contract on a regular basis. Doing this enables you to make appropriate changes that reflect growth and other changes that occur within the business.
4. Establish what the buyout terms are and who has the right to initiate one. If an issue comes up to which a resolution can’t be found, terms of a buyout or change in ownership are important to have in place so that emotion can be taken out of the equation.
Do yourself a favor and follow these four simple steps if you decide to enter into a partnership. Doing so will prevent one partner or a majority partner from having the ability to change the terms on the fly to suit his or her needs.
Founder, President, and Chief Executive Officer
Salt Lake City
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