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Your limited liability partnerships are not on firm ground if you haven’t done some basics at the outset to know you are a good match.
Unfortunately, partnership startups feeling the pinch of finances, too often ignore some initial investments that could save a lot of misery and financial loss down the line. Having an A team of advisors including legal, financial, coach/mentor is very wise and cost effective. Isn’t your dream worth it?
It was not surprising, although a long time coming, to read the 12/25/15 article in the LATimes titled Helping start-up leaders keep it together. The subtitle was more telling. A growing number of tech firm co-founders turn to therapists to resolve conflicts.
Limited Liability Partnerships
As a former therapist and coach to business partners for about 25 years, I have seen over and over again that the reason for the 70% failure rate of business partnerships could be reversed if the partnership had started on the right foot so to speak.
The main point at the outset is not to be so eager for a partner that you are willing to overlook red flags. The red flags have to do with you not being a good match in the first place. Maybe your values, workstyles, personal vision, and much more render you incompatible.
Or maybe you are a good match but because you haven’t talked about every aspect of the business, your values, vision, division of responsibility and much more (spelled out in BPAT) you set yourself up for trouble.
The need for “therapy” or partnership coaching and the willingness to engage in it hopefully, at that point will be enough to save you.
Take your time in “the getting to know each other”, in great detail, phase. That means you have had all of the discussions, made the decisions and most importantly built the trust, respect and commitment to each other as much as to the business. Now is the time to see a lawyer.
Limited Liability BPAT
With the completion of the BPAT you now have most of what the lawyer will need to set up a partnership agreement and the legal entity, such as a limited liability entity with a limited liability operating agreement. You will discover the difference between a general partnership, which you have by default unless you make another choice as a result of a lawyer consult.
A word of caution. It is true that the internet offers free partnership agreements and do-it-yourself docs to set up your LLCs, joint ventures and a variety of other projects.
You may be all right using some of them, but none of them address the uniqueness of your partnership and business. They most likely do not address specific laws of your locale and unfortunately, some of the templates have mistakes. Care enough about your dream to consult the best professionals.
Investing at the outset in setting up both your relationship and business entity is as one of my clients called it “chump change” compared to what you will lose if there is a nasty breakup because you didn’t invest.
The old adage, which pre-dates today’s start-up partnerships, is however, still wise in its simplicity. “Penny wise and pound foolish”.
The definition from the Cambridge Advanced Learners Dictionary & Thesaurus is to be extremely careful about small amounts of money (spending now) and not careful enough about larger amounts of money (that savings will cost you later)
After you are sure you are a good match, consult with your lawyer to set up your limited liability partnerships or something different, based on legal advice.