Going into business with a partner—whether it’s a spouse, family member, or friend—can feel like the perfect match. After all, you trust this person, you share a vision, and it feels like nothing can go wrong. But here’s the thing: business partnerships, even with the best of intentions, can go south quickly if certain measures aren’t in place.
We’ve all heard horror stories of partnerships gone bad—falling outs that destroy friendships, ruin family ties, or leave one party stuck with an unfair share of the responsibilities.
While it might feel uncomfortable to think about the potential issues that can arise when working with someone close to you, taking the right precautions can protect your relationship and ensure the fairness of your business efforts.
In this post, we’ll explore key measures and responsibilities you should implement, no matter how solid your partnership might seem.
- Start with a Solid Partnership Agreement
One of the biggest mistakes business partners make—especially when there’s a personal connection involved—is not formalising their partnership with a partnership agreement. It’s easy to fall into the trap of thinking, “We know each other, we don’t need a formal contract.” But failing to create an agreement can lead to confusion, disagreements, and even legal issues later on.
A business partnership agreement clearly outlines each partner’s responsibilities, contributions, and rights within the business. This legally binding document should cover essential aspects like profit-sharing, decision-making, and conflict resolution. It acts as your safety net when things don’t go as planned.
Key Areas to Include in Your Partnership Agreement:
- Roles and Responsibilities: Clearly define who is responsible for what. Will one partner handle operations while the other focuses on marketing? Who’s in charge of finances? Avoid overlap and miscommunication by setting boundaries.
- Profit Distribution: How will profits (and losses) be split? Even if you’re working with a spouse or family member, this needs to be documented to avoid disputes down the line.
- Exit Strategy: What happens if one partner wants to leave the business? Having a clear exit plan can prevent arguments or legal battles if the partnership needs to end.
A well-constructed agreement can save you from messy disagreements down the road. No matter how much you trust your partner, having everything in writing ensures everyone knows their role.
- Maintain Open and Honest Communication
Good communication is essential in any business partnership, but it’s even more critical when personal relationships are involved. Personal ties can complicate business decisions, so you need to create an environment where both partners can openly discuss concerns, share feedback, and raise issues before they snowball.
Set Regular Check-Ins
It’s easy to assume that, because you know each other so well, you don’t need formal meetings. But having regular check-ins can ensure that both partners are aligned on business goals and that any concerns are addressed early. These meetings are an opportunity to review progress, reassess strategies, and check in on how the partnership is working on a personal level.
Keep Personal and Business Matters Separate
One of the biggest challenges when working with a partner you know personally is keeping your business and personal life separate. Business disagreements should stay in the business, and personal issues shouldn’t spill into professional decisions. If something from your personal life is affecting the business, address it directly, but avoid allowing emotional responses to cloud your business judgement.
Effective communication ensures that both parties stay on the same page, and it helps avoid the misunderstandings that can lead to frustration or resentment.
Avoid Overlapping Duties
When you’re starting a business, it’s tempting to work together on every task, but this can lead to inefficiency. Instead, define who is responsible for what from the outset. This might mean dividing tasks based on each partner’s strengths—one partner might be better at sales and marketing, while the other focuses on operations or finances.
Accountability Is Key
Once roles are defined, each partner should be accountable for their area. If one partner consistently drops the ball, it can lead to frustration and burnout for the other. By holding each other accountable, you create a fairer, more balanced working relationship.
Knowing who is responsible for what helps keep things organised and ensures that all aspects of the business are covered without stepping on each other’s toes.
- Set Boundaries and Expectations
Even the best relationships can be tested by the pressures of running a business. To avoid unnecessary strain, it’s crucial to set clear boundaries and manage expectations right from the start. This is particularly important if you’re working with a spouse, family member, or close friend. Just because you know each other well doesn’t mean you can read each other’s minds when it comes to business.
Work-Life Balance
One of the biggest challenges for business partners with personal ties is maintaining a healthy work-life balance. When your business partner is also your spouse, for example, it’s easy to let business conversations take over your personal time. Set boundaries around when and where business matters are discussed to maintain harmony in your personal relationship.
Clear Expectations for Growth and Success
Have an open conversation about what each partner expects from the business. Do you both have the same vision for growth? Are your financial expectations aligned? Defining these expectations early can help prevent disappointments and misaligned goals in the future.
Setting boundaries helps maintain a healthy relationship and ensures that both partners are committed to the same vision of success.
4. Prepare for the Worst with Contingency Plans
No one likes to think about things going wrong, especially when starting a business with someone they trust. But the truth is, partnerships can go sour for a variety of reasons, and you need to be prepared for the worst-case scenarios.
Exit Strategy
One of the most common points of contention in failed partnerships is what happens when one person wants to leave. This could be due to personal reasons, financial issues, or simply wanting to pursue other opportunities. Having an exit strategy as part of your partnership agreement will clarify how one partner can leave the business without causing turmoil.
Dispute Resolution
Even the best partnerships will face disagreements at some point. Having a formal process for dispute resolution—whether it’s mediation or legal arbitration—can help resolve issues without damaging the relationship further.
Taking the time to prepare for potential problems ensures that you’re not caught off guard when challenges arise, and it can help preserve both the business and the personal relationship.
Get Expert Help to Set Your Business Partnership Up for Success
Starting a business with someone you trust is exciting, but without the right processes in place, even the strongest relationships can be tested. At Keirstone, we specialise in helping business partners create solid financial foundations and ensure long-term success. Whether you’re just getting started or need help managing your existing partnership, we’re here to help.
Schedule a call with us today to get expert advice on setting up partnership agreements, managing finances, and ensuring a smooth, productive business relationship!
By putting the right agreements, processes, and communication methods in place, you can safeguard your business partnership from the challenges that often arise, even when working with people you trust.
Schedule a call with us today and let’s explore how to structure your company formation to include a business partner and remove the pressure of the company structure!