My business partner Candy, and I have been writing together for almost 4 years. We co-own PatAndCandy.com, offering support and encouragement to homeschool moms and parents of teens.
A while back, a blogging friend of ours told us she is considering a partnership with a few other associates, and asked us to share some thoughts about a joint venture.
So, we put our heads together! While we are by no means offering legal advice here, today I’m sharing an overview of the top five areas to consider before jumping into a joint venture of any sort.
As you prepare to move forward, let me encourage you to overthink it. No matter how well you know your potential partners, it is SO important to have everyone’s cards on the table and look at them sans rose-colored glasses at the get-go.
It’s also important to determine that everyone’s expectations are reasonable in terms of workload and responsibilities and pay-off. Everyone needs to understand why each person is interested in being a part of the project. Ideally, all should be on the same page, or at least know what page everyone else is on (and be ok with it!) as you move ahead.
5 Considerations Before Taking on a Business Partner or Starting a Joint Venture
1. Legal – Personally, I don’t think you should rush into an LLC or any other form of business registration until you are fairly certain that things are going to work out. Hastily or flippantly doing so creates an unnecessary administrative mess, not to mention a bite out of your pocketbook. You might want to consider having the venture as an extension of one of the partner’s current business, with the other partners perhaps getting a set amount or percentage of proceeds as independent contractors. If you do decide to go ahead and make it legal, you definitely want some “sine qua nons” in place. Meaning, cover the following points (at minimum):
- What responsibility does each partner have? Is there a back-up?
- Will you be determining any type of professional standards?
- How are differences in opinion handled – who has the final say?
- What happens when one of the partners wants/needs to leave the group? Or isn’t holding up their responsibilities?
2. Financial – This could get tricky if your partners are not located geographically near each other. Fortunately, there are so many online banking options these days; you could use one that’s cloud-based so that all partners have access and accountability. Other considerations include:
- Under whose name will a bank account be set up, and who will manage finances?
- How will reporting be communicated to all parties?
- How is the budget set up and whose responsibility is it?
- Who will handle the tax preparation and record keeping?
- What if the partner in charge wants/needs to leave the group? Who is willing/able to take over finances?
- How will affiliate income be divvied up?
3. Responsibilities – Handling the daily operations will get more complicated and challenging to maneuver when there’s a group involved. Think about:
- The name of your blog, website or business: Will it reflect any of your personal names? Or be something more generic? If it’s in any way specifically connected to your names, what happens if someone leaves?
- Social media accounts – This could be a potential mess because often, accounts need to be connected to personal accounts (Facebook, for example). Others, such as Pinterest, only need an email account, so you can create an account for the business and use that one. Closely look into each account and see what their requirements are and move forward from there.
4. Personal careers – Even in a joint venture, it’s a great idea for each person to maintain their own blog/business/other personal income streams. But consider: will working in this partnership hamper or help that? What happens when priorities or responsibilities conflict? I think much of this can be covered when you discuss your expectations together, but it is important enough to be considered separately, as well.
5. Social – Starting a business with friends sounds warm and wonderful and fun. But, at the end of the day, it is SO easy for business issues to tarnish friendships (after all, there’s always a bit of truth to cliches, and “never do business with a friend” has been around for a long time). Don’t underestimate the strain this could put on your relationships, especially if one of you has to back out for any reason. Please make sure you talk about this.
Well, that about covers our thoughts – can you come up with any others? Are you thinking about a new project this year with another like-minded associate?