Business partnerships are not all that they are cracked up to be. Most people think that by starting a business partnership with somebody it will be just like having their own business. While this is true in one sense the one thing that they are not think about is that starting a business partnership means that two people are going to be running the business, so both people will be the ones making all of the decisions, and sometimes you might not see eye-to-eye with your partner.
One of the biggest pitfalls of a partnership is when you start a partnership because you cannot afford to hire the other person as an employee. What happens in this case is once you have made them a partner you will be sharing everything about the business, including any profits that the business makes, but also any debts or liabilities that the business incurs. This can cause problems and resentments because the person who had the idea resents the fact that they have to share the profits and the person who is along for the ride resents having to pay the business debts and liabilities, which both of these aspects are covered under the partnership agreement. This type of situation is entirely avoidable because you can wait until you can afford to hire the other person as an employee or even work out some type of independent contractor agreement.
If you fail to write and sign partnership agreements the partnership is sure to fail because nothing will be covered in writing, which means people can argue about what is supposed to be happening and how things are supposed to be handled. When creating a partnership agreement you want to ensure that all of the details of the partnership are covered, which also includes the obligations of the partnership. When creating the partnership agreement you will also want to consider a limited partnership, especially if you are not going to be as active in the business as the other partner is. The limited partnership is the best way to protect your personal assets because you will have limited liability.
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