Starting a business with a partner can have many advantages. However, you need to take steps to protect your financial interests because things do not always go as planned.
Partnering with someone on a business deal can present a substantial risk that may affect your holdings and financial stability. Addressing specific areas of your arrangement help protect you from potential legal and financial troubles.
Selecting a business structure
Consult with experienced professionals before choosing your business structure. Understanding the legal implications of each formal business type helps you make informed decisions that protect your fiscal future. A knowledgeable attorney can assist you with drafting agreements, executing legal documents and understanding the pros and cons.
Limit potential debt liabilities
Invest in a commercial insurance policy to cover potential legal claims. Without a quality insurance plan, your business may not have the capital to cover any judgments or settlements against your operation. Your written contract should also contain language that prevents your partner from incurring debt without your consent.
Have an exit strategy
Include specifics in your partnership agreement regarding what happens when one partner leaves the company. Detail the buy-out terms when starting your business to ensure fair arrangements and safeguard against breach of contract claims.
Invest in your accounting system
Another way to protect yourself from financial loss is through detailed, accurate accounting and tax information. Do not make accounting an afterthought. Taking the time to handle your financial data appropriately can save you from costly mistakes, embezzlement, fraud and more.
When you address potential concerns at the beginning of your partnership, you can avoid adverse outcomes in the future. Strategizing and writing everything down is essential for protecting your commercial investments.
