In business, going out on your own can be as exciting as it is scary. Teaming up with people you know little about except the fact that you share common business interests can be the scary part, which probably shouldn’t be. It’s also easy to assume that you’re better off starting a business with someone familiar.
Unfortunately, doing business with friends or family could end up as the proverbial knife that drives a wedge between you and them. But this shouldn’t stop you from starting a business with others because safeguards exist.
We’ll now consider some tips for a successful business partnership.
1. Legal Documents
Establishing the business partnership as an independent legal entity, separate from all shareholders, must be the starting point for a successful business partnership. The legal side of your business is necessary to preserve its integrity. Every business wheel has spokes, including shareholders, management, employees, suppliers, and government policy. Having each business function established using a relevant business document is advisable.
You need different business documents for your business, including a profit share agreement, confidentiality policy agreement, employment agreement, and sale of goods agreement. We’ll briefly consider the crucial role played by each of the business documents mentioned.
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Profit Share Agreement
A profit share agreement is a detailed document necessary in a business venture where partners work together to achieve a common objective within a specified period. It is a legally binding document that governs profit-sharing by defining the term ‘profit’ within the context of your business. In most cases, a profit share agreement also clarifies the different cost categories, including direct and indirect costs, which the business must expense before shareholders can share revenues.
Profit-sharing can result in disputes and disharmony that don’t augur well for a business. A profit share agreement can minimize or eliminate such disputes by addressing and clarifying numerous issues, including the relationship of the parties involved, the scope of services, excluded services, fees and expenses, invoicing, and statutory obligations, among others.
A partnership share agreement ensures you comprehensively address the risks involved during profit sharing.
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Confidentiality Policy Agreement
It’s expected that there will be instances when there’s a need to share sensitive information with others to keep business operations running. A confidentiality policy agreement is a legally binding document that secures the privacy of such information by binding all parties involved to keep it confidential.
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Employment Agreement
Your partnership will need to recruit people to perform different functions for business growth. The employment contract lays out the obligations of all parties involved, covering essential areas like the probation period, remuneration, hourly rates, annual leave, and disciplinary processes, including termination.
A detailed employment agreement lays out the relationship between employer and employee, minimizing disputes and fostering more fulfilling work environments.
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Sale Of Goods Agreement
To minimize misunderstandings with your customers, they must know your terms and conditions, spelling out different rights and obligations for all parties involved. The most common issues that a sale/service agreement needs to address include price or fees, delivery and returns, delivery timelines, and termination or alteration of the agreement.
Legal business documents are critical in limiting contingent liabilities that result in hefty fines and costly lawsuits. However, business documents can be technical and challenging to draft, whereas getting an attorney to prepare them might be costly for small businesses and start-ups. You can avoid this problem by using business templates. Business templates provide a cost-effective way to guide and formalize the various aspects of your partnership.
Beyond the critical legal aspect, soft skills are also crucial in managing a business partnership.
2. Communication
Clear and open communication between partners is vital for a successful business partnership. Ongoing communication between employers, employees, and external stakeholders like clients is a crucial building block of trust in all relationships, including business. Open communication also fosters an environment that enables giving and receiving feedback, making room for gaps to be addressed as soon as they’re spotted. Finally, business partnerships thrive when all parties remain focused and share similar values and objectives, which communication enables.
3. Planning
Continuous business planning is also critical for managing a business partnership. Change in your business environment is guaranteed, and planning enables you to navigate such seasons. Planning also contributes to business growth by providing avenues to take advantage of opportunities and manage cash flow. Planning increases the probability that your various action steps are proactive instead of reactionary.
Final Word
Successfully managing a business partnership requires a holistic approach that meshes various aspects, including legal and technical. Despite this, ensuring legal compliance in every part of your business improves overall outcomes. Signing up for customizable business templates is a cost-effective way of taking care of the legal side, a critical element in managing a business partnership.
