If you are considering bringing in a business partner, there are some steps that you should consider taking to protect yourself and the business as a whole.
What to Consider When Adding a New Business Partner
You’ve got to be careful when you bring on a new business partner. Another person with authority means added liability and responsibility for you and the overall company.
Establish a Formal Business if You Haven’t Already
You should file the paperwork for a limited liability company or a corporation if you haven’t yet. Partnerships are very dangerous if they’re not incorporated or organized into corporations or LLC. The limited liability that these business structures offer separates your personal assets and your business assets, so mistakes (or even intentional acts) made by your business partner are limited in their negative effect.
Craft an Operating Agreement
If you do have a company, we recommend creating formal operating documents.
An operating agreement is an agreement between the owners of a company that establishes how the company will run. This document includes voting rights and procedures, distribution rules, manager authorities and limitations, estate planning components, and other vital rules to limit uncertainty and conflict within the company.
Basically, it covers a lot of the issues that are unforeseen between the partners and keeps everybody accountable, limits liability between individuals, and makes sure that the business runs smoothly.
Learn More About Operating Agreements
If you are considering expanding your business with a new business partner, make sure you do it right with Daniel Ross & Associates. To schedule a free consultation, please call (216) 307-5590, or get in touch using our online intake form.
All the best,