In Minnesota, one of the business entities commonly created by entrepreneurs is the partnership. As noted in Entrepreneur magazine, there are advantages to creating a partnership entity. Among the advantages are that the owners can start partnerships relatively easily and inexpensively. Moreover, partnerships do not require annual meetings and are not accompanied by the formalities that would be required for businesses which are incorporated. Finally, partnerships offer favorable taxation to smaller businesses.
One of the hardest tasks in forming a partnership is to select partners who will help you create a successful business. The author of an article published on the PBS website offers several suggestions as to how to go about choosing a business partner. First, it is useful to select a partner who has a deep knowledge about the business you are about to establish. Second, you need to choose partners who have skill sets that are different from those you possess. For example, one partner can be skilled in marketing while another is skilled in crunching the business's financial numbers. A diverse group of partners means that everyone brings some new and valuable skill set to the table.
It is a given that you need to choose partners who have a strong work ethic. One or more partners who do not pull their weight can quickly become an albatross around the neck of the business. It is also wise to select business partners with whom you get along. Partners do not have to be the best of friends. However, it is obvious that if one or more partners cannot tolerate each other very well, the business is probably going to be in trouble at some point.
Finally, you should choose partners whom you respect. In even the most successful partnership, disagreements are bound to arise. If partners respect each other, those disagreements can remain mostly friendly disagreements without turning into ugly disputes that could threaten the viability of the business. In this regard, the Wall Street Journal adds that prospective partners should always feel comfortable expressing opinions, ideas and expectations with each other.
Choosing the right business partners is not a science and, sometimes, an otherwise viable business can be put in jeopardy of dissolution if the partners find themselves locked in disputes not easily resolved. As observed by the author of an article published in YSF magazine, if your business "has the potential to turn south, it absolutely could." It is therefore essential that all partnerships have a written partnership agreement that protects each partner's expectations.
A well-drafted comprehensive partnership agreement should set forth the powers, duties and responsibilities of each partner and provide a mechanism for making business decisions. Partnership agreements should contain an exit strategy in the event that one partner becomes disabled or decides to leave the business. Further, the agreement should detail precisely what happens upon the dissolution of the business if that becomes necessary. Finally, having a procedure in place for dealing with decisionmaking deadlocks is crucial in order to prevent paralysis of the business's operations.
Seeking legal guidance
Those who are considering forming a partnership to conduct business should contact a Minnesota attorney with experience in business formation. An attorney can offer advice as to whether a partnership is the optimal business entity given the type of business it will be conducting. An attorney can also draft a partnership agreement which will-to the degree possible-protect each partner's respective financial interests.