In Florida, as elsewhere in the United States, the partnership remains one of the most commonly used types of business organizations. Generally speaking, a partnership is an association of two or more persons who carry on a business, as co-owners, for profit. The author of an article published in Forbes magazine finds that, in many ways, "a business partnership is similar to a marriage." At a minimum, you need to have trust in your partner before entering into a partnership. The Wall Street Journal notes that, unfortunately, "like many marriages, business partnerships can end in bitter divorce." This is one reason people need to be extra careful when deciding to go into partnerships with relatives and friends since a partnership "divorce" can be messy.
Continuing the marital analogy, the partnership agreement can be likened to a prenuptial agreement in marriage. The Small Business administration observes that those persons considering forming a partnership need to discuss and reach agreement on a wide variety of issues up front such as how the business will be operated. The final agreement of the prospective partners needs to be set forth in the partnership agreement. The agreement is crucial for determining how future business decisions will be made and how partners will divide profits. Further, the agreement needs to set forth how the partners will resolve disputes, buy-out another partner and how to dissolve the partnership in the event that the partners decide upon a business "divorce."
It is also important that the partnership agreement spell out what each person will contribute to the business whether in terms of financing, property, labor or customers. The importance of the partnership agreement is readily apparent since partnerships entail that, like any good marriage, more than one person will be involved in the decision-making process.
One needs to choose his or her partners strategically according to an article in Smart Business Magazine. When properly chosen, strong and savvy business partners will go a long way to help grow a company. Keep in mind that-like married couples-business partners can change over time. Because of this, "many good business ideas die because one partner doesn't live up to his or her commitment."
The author of the Smart Business Magazine article offers the following advice on choosing good business partners. First, your knowledge of the emotional temperament of your partners is a good predictor of how you will be able to get along with those partners in the future. Second, get to know the current and past business relationships of potential partners and determine whether they are savvy businesspeople. Third, do not go into business with a partner who you suspect may take advantage of you. Fourth, make sure that prospective partners demonstrate "flexibility" in discussions leading up to the formation of the partnership. If they dig in their heels on small issues, this may indicate potential future confrontations.
Forbes magazine adds that, when you choose a business partner, make sure that it is someone that you can instinctively and implicitly trust through thick and thin. Anyone can be a good partner when the business is booming. The trick is to find a partner who "will be with you in the trenches during the challenging times."
Seek legal help
If you are considering going into a partnership, you should consult with a Florida attorney experienced in business formation. The attorney can advise you on the drafting of a partnership agreement that best protects your interests.