Disclaimer: The below is solely intended for informational purposes and in no way constitutes legal advice or specific recommendations.
So, you and your friend, family member, or co-worker came up with a brilliant business idea and you want to make it a reality. You both have the passion and drive for it, and you love spending time together – what could go wrong?
The answer is, a lot. Many people think it would be fun to go into business with someone they know, but starting a company is a serious legal and financial decision. Because of the high stakes involved, it takes more than a friendship to make any business successful.
Before you launch, it’s important to thoroughly vet your potential partners to make sure the arrangement won’t hurt you in the long run.
Due Diligence: What To Look For In Your Business Partner’s History
What makes someone a good business partner? Aside from their experience and skill in the industry you’re entering, you want someone who’s responsible and trustworthy. But knowing someone on a personal level may not be enough — investigating your potential partner’s financial and legal history before you go into business could end up saving you from trouble down the road.
A public records tool like BeenVerified can potentially help you conduct some preliminary background research. Here are a few factors you’ll want to look into when vetting your business partner:
Financial troubles. When you start a business, you’re likely going to invest your own money into it at the beginning. If your partner has a troubling financial past — particularly a large amount of debt or even bankruptcy — they may not be the most responsible with their money. Consider how much control your partner would have over the business’s finances, and whether you want them putting your investment on the line.
Current or past lawsuits. Has this person ever sued a former business partner, or been sued themselves? Have they ever been charged with fraud or embezzlement? If so, you may want to think twice about taking a risk on a joint business venture.
A rocky marriage. Someone who’s hit a rough patch in their marriage might understandably be distracted dealing with the emotional fallout of separation, and not be able to put their full focus on the business. But as Time notes, there’s a practical reason to keep an eye on this situation: If you launch your venture and then your partner files for divorce, the business could be considered an asset that the spouse is entitled to. Their divorce proceedings may require a business valuation, which “could consume time and take resources away from running the business for everyone,” attorney Stephen Furnari told Time.
Public image and personality. Take a look at your partner’s social media accounts and pay attention to how they present themselves and interact with others online, especially strangers. If you find they have an unpleasant, inappropriate or aggressive online presence, consider whether they’d be able to scale it back and clean up their accounts for the sake of the business. You don’t want your business to struggle because of your partner’s polarizing political rants on Facebook.
If your partner’s background check reveals a checkered past, approach them and have an honest conversation about the issues. If, after listening to their side of the story, you feel you can no longer trust them, don’t proceed with the partnership.
However, even if this person has a clean record, it doesn’t mean you’ll work well together. Be mindful of how your potential business partner interacts with their family and friends. Are they a peacemaker or troublemaker in these relationships? Are they generous or do they tend to lean on the selfish side? Do they have troubled relationships and, if so, why? How a person treats those around them can be a big indicator of how they will interact with you, especially when times are tough.
Making Your Business Partnership Work
If you do decide you want to go into business together, discuss your goals with your partner and make sure you understand theirs. Many businesses fail due to misaligned goals and poor communication between partners. Before you sign any business agreements, make sure you both feel comfortable and confident with your plans, and that you have a system in place to regularly touch base and discuss business matters.
Remember that, as with any relationship, good communication is key. Be open, honest and respectful – especially during disagreements. If you’re having trouble finding a middle ground, find an unbiased mediator to weigh in on any given issue. Some of the best business partnerships are born out of divergent viewpoints, but only if conflicts are handled with care and respect.
Justin Lavelle is the Chief Communications Officer for BeenVerified, a leading source of online background checks and contact information. It allows individuals to find more information about people, phone numbers, email addresses, property records, and criminal records in a way that’s fast, easy, and affordable. The company helps people discover, understand, and use public data in their everyday lives. https://www.beenverified.com
