Business Partnership: Proceed With Caution

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Is a business partnership the right fit? In my aspiration to become an entrepreneur I made a conscious effort to learn about entrepreneurship. Aware of the various types of business structures, in my planning for entrepreneurship I contemplated a partnership. Fortunately, being a student of a masters in entrepreneurship program and from friends who are entrepreneurs, I’ve gained some insight. What I’ve learned is when it comes to business partnering know these four things: Who, What, When, and Why.

Who Will Be Your Partner(s)?

Often the “go-to” for a business partnership are friends. Friendship is not enough reason to join into a business partnership. Case in point, I know an entrepreneur who entered a business partnership with a friend. Months in, she realized she couldn’t partner with her partner. Their ideas on how to run the business were vastly different and they clashed so much they couldn’t finalize many decisions. The partnership had to be dissolved to keep the business, and the friendship intact. As the old saying goes “It’s not personal, it’s business”. In selecting a business partner think of – who would be a good fit for the business? Are you like-minded about the business goals and direction? Who has what it takes to fulfill the business goals and make the business grow?

What Will Be The Responsibilities of Each Partner?

Partnerships don’t have to be 50/50. A rule of thumb when determining partnership percentage is to weigh it based on the contributions of the partner(s). Does the investment (time, talent, treasure) of each partner warrant the percentage of equity? Many enter a seemingly 50/50 partnership, assuming the cost and responsibilities will be split equivalently but this is not always the case. There are times in partnerships where 50/50 is theoretical, not practical. Therefore, a partnership agreement is imperative. It will spell out the responsibilities and contributions of each partner (experience, skill set, investment, etc.).

When To Partner?

A business that doesn’t start out as a partnership may at some point need a partner. Aspiring and current entrepreneurs should think about if or when their business would need a partner. For example, when expanding or starting a new venture a partnership may be necessary to offset the associated cost and responsibilities. A benefit of sole proprietorship is it allows for the experience of sole ownership, and for time to monitor business and determine the need, if any for a partnership. To help decide if and/or when to partner, outline circumstances and conditions in which a partnership will be needed or beneficial.


David Cohen

Rachel Cohen: Rachel is a sustainability consultant who blogs about corporate social responsibility and sustainable business practices.

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