Recently, I’ve found myself helping business partners sort out their differences on how to run the company.

People often end up in this situation because they failed to share their respective goals and plans at the beginning. One partner imagines a part-time second income, while the other sees a full-time business with growth possibilities.

I tell my clients to treat their business partnerships like a marriage: Communication is key.

It is best to understand each other’s goals and plans from the beginning. If one partner has a view of the business that is different from the other’s, it’s best to know up front rather than six months and $100,000 down the road.

Here are some important questions to ask each other in order to create a strong business partnership.

Establish common ground on your business’ budget. How much money will your company need to make it through the first year, and who will contribute how much money?


Be sure to include the type of equipment and office space your company will need. I’ve generally found that if each partner can contribute equal amounts of money, it reduces stress between the partners and promotes a sense of equality.

At the same time, determine who will manage the financial books. Will both partners have check-writing authority? Will both have company credit cards? What expenses – such as fuel, meals, vehicle payments and supplies – will be paid by the company?

It is also important to know if each partner is able and willing to make comparable time commitments to the business. Will both devote 100 percent of their time to building the business, or does each need to moonlight at another job as well?

While moonlighting is sometimes necessary to make ends meet, it also tends to generate issues about whether each partner is contributing his or her fair share of time to the business. The sooner all partners are working full time for the business, the better.

Another topic for discussion is the role each partner will play in the business. Will one person manage operations while the other deals with customers and marketing? It is important that the partners agree upon a fair division of labor.

How compensation will be calculated should also be discussed. Sometimes partners simply assume all profits should be divided equally, but that is not always the best way to handle compensation.


Hours worked, business generated and productivity are all common ways of calculating compensation. I generally recommend that partners agree upon a base salary or other compensation for each partner and then use any residual year-end profit as a bonus.

Preparing for failure is also one of the keys to success. If each partner understands what options each has to leave the business, it often has the effect of making the union more solid.

Partners should discuss what right, if any, a departing partner has to receive a return of money or equipment contributed to the business.

I frequently recommend that a departing partner be penalized by receiving back less than he or she initially contributed in order to create a financial incentive for both partners to stay with the business through good times and bad.

It is also a good idea to have a conversation about what to do if your business experiences a profit (not a bad problem to have). For example, will those profits be distributed to the owners or re-invested in the company? Reasonable people can disagree on this issue. It is best to discuss it and plan ahead.

Finally, it is good to discuss what the business will do if the partners cannot agree and become “deadlocked.” Sometimes partners will want to designate an individual to be a tie-breaker.


But other times, the threat of a deadlock is sufficient to force reasonable individuals to find a middle ground. Each situation may require a different solution. The key is for the partners to discuss it and have a plan.

Remember, a business partnership, like a marriage, is a serious commitment. People thinking of entering into a business partnership should make the time to discuss these topics and get to know one another before they dive in. Starting that conversation early and continuing that conversation throughout the life of the business is one of the keys to success.

It is also a good idea to have a conversation about what to do if your business experiences a profit (not a bad problem to have).


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