Going into business with partners

So far this month, we have gone over starting a business by yourself and with your significant other. This week, we are going to touch on starting a business with a partner (or partners). In many cases, people determine that they do not want to go into business by themselves and that their significant other, while a great match for a life partner, is a terrible match for a business partner. After coming to these realizations, the hunt begins for a great business partner.

In some cases, business partners enter the picture like many other people in your life – without trying to find someone that is a perfect match, it just happens. It may be that you have a business and hire someone that ends up a great match for becoming a partner. Or it may be that you have someone that you have met through work or other social circles that is a compliment to you and would work great as a business partner. In other cases, it may take more work. You may have to attend networking events or search someone out to find someone that will work as a partner.

When determining if someone is a good business partner (regardless of how you met them), you need to ask a lot of questions. Going into business with someone is like marrying someone – and many times there is a lot more emotional and financial entanglement between business partners then even spouses. With a business partner, your livelihood is going to depend on what they do in regards to the company that you jointly own. Depending on how the business is set up, many times financial decisions will need to be run by them and approved by them in many cases. You will want to know what the person brings to the table (both financially and skill-set wise). Questions such as how many hours does the person want to work, what are their long term goals, what are their short term goals, how to they work with customers, what are their business plans, what are their strengths and weaknesses, and how they deal with difficulties are just some of the things you want to know before you enter into business with someone.

Legally, when you go into business with someone you need contracts between the two of you. You want to decide prior to having issues how you are going to deal with them – and you want this in writing. If you have an LLC, this is accomplished through documents such as an Operating Agreement, Membership Agreements, and Buy Sell Agreements. If you have a corporation, you will have Bylaws and Shareholder agreements. Careful drafting of these documents is a must as just like marriages, many business marriages fall too.

Tax wise, if you are going into business with partners, a careful look at all of the partners’ financial lives is necessary. While an s-corporation may be best for one partner, it may be that a partnership (as far as taxes) is better for another partner. If it ends up that different tax structures are better for different individuals, then this will be one of the first decisions that the partners will need to make. It may even be that due to the partners that are going to be included in the ownership, certain tax entities are unavailable. Therefore, in addition to having an attorney help structure the business and write the business documents, discussions with the CPA should take place early on.

If you have any questions about going into business with a partner or partners, please call me, your Denver business lawyer, Elizabeth Lewis, at 720-258-6647 today!

About Elizabeth Lewis
Elizabeth Lewis is a small business attorney, mother of two, and owner of the Law Office of E.C. Lewis, PC. She works with small businesses from start up to dissolution and everything in between. In addition to running her law firm, she teaches small business owners throughout the state at various business groups, is part of the Colorado Bar Association's Business Law Section, and several chambers. Legal Background Following the advice that she has given hundreds, Denver Business Attorney Elizabeth Lewis became a small business owner in January of 2010. She opened the doors to her own law firm, the Law Office of E.C. Lewis, P.C. which specializes in business, intellectual property, technology, and online law. Prior to starting her own business law firm, she worked for the Law Firm of David A. Sprecace, P.C., where she developed the firm’s business and technology law practice. She also has extensive experience in these fields from working under the lead attorney at the CU Technology Transfer Office where she wrote licensing, non-compete, employment, and business contracts. IT Background Prior to attending CU Law School, Elizabeth worked at Experian, one of the largest credit bureaus in the country providing IT support as part of the email-marketing department. She holds a Masters of Science in Computer Information Technology, gained while working in system administration prior to law school. She continues to be active in the IT community by attending conferences, classes, and events to learn about new technology before it hits the internet. Education Elizabeth Lewis is a native of Denver, Colorado. She has attended Holy Family High School, Metropolitan State College of Denver (Bachelor of Arts), and Regis University (Masters of Science). She received her Juris Doctorate from the University of Colorado Law School and continues her legal education taking Continuing Legal Education classes from the Colorado Bar Association and Denver Bar Association on a regular basis. Additional Activities Elizabeth regularly participates in the Denver Bar Association and Colorado Bar Association. She recently was named the head of the e-Commerce Section of the Business Law Section, Colorado Bar Association. Elizabeth is active in her community and hold memberships with the Fax Partnership, South Metro Chamber of Commerce, Glendale Chamber of Commerce, Colorado Bar Association, and Denver Bar Association. She teaches regularly at locations throughout the Front Range. In her free time, she loves spending time with her family which includes her husband, two sons, and dog and enjoying all that her home state has to offer, including hiking, biking, enjoying over 300 days of sunshine a year, and most recently crossfit.

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