

Top 10 Mistakes Businesspeople Make When Forming Partnerships - donna
http://allbusiness.sfgate.com/business-planning-structures/business/4009-1.html

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micks56
I am not a lawyer, but I am a law student. This article is off in some key
ways.

1\. Not having a signed partnership agreement.

A partnership usually arises without a partnership agreement. People just
start doing business together. If your agreement is silent on an issue,
default rules will apply. Get your state's UPA (Uniform Partnership Act) rules
to see what will apply.

2\. Not having an attorney assist with drawing up the agreement.

Make your own first. Then go to the lawyer. This will save you some money and
give the lawyer and idea of what you want. Your first draft doesn't have to be
elaborate, and it shouldn't have legalese. Just describe what you want.

3\. Not including a way out

Some partnerships have no way out and partnership is dissolved when a partner
leaves. See if this applies to yours.

4\. Not using your individual strengths

Ok here.

5\. Not forming a limited partnership

This is bad advice. A limited partner in an LP has no personal liability, but
also has no say in how the business is run. The general partner does have
personal liability and runs the business. The general partner will be liable
for partnership debts.

Better advice is to form a limited liability partnership (LLP) or a limited
liability limited partnership (LLLP). General partners in those can obtain no
personal liability by registering with their state. This is by statute. Check
your jurisdiction.

6\. Not considering the liability issues.

Ok here.

7\. Rushing in

Ok here.

8\. Not adhering to state requirements and regulations

Actually, they usually aren't that bad. I am in Massachusetts. Here you have
to file a 1-2 page report each year listing the business headquarters,
directors, stock issues, and pay a few hundred dollars.

9\. Choosing the wrong partner

Ok here.

10\. Not adequately capitalizing the partnership

The article got this right and it is a big issue. Failing to adequately
capitalize the business is against the law. Courts dissolve businesses when
this happens and may "pierce the veil" and hold people with limited liability
personally responsible for partnership debts.

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ssharp
Someone should compile the Top 10 "Top 10 lists" of the day.

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webwright
"Not having a signed partnership agreement. All types of partnership should
have every detail spelled out and signed by all parties. Far too many friends,
and even family members, have made the mistake of not putting everything in
writing and ending up with strained relationships."

Partnership agreements don't avoid strained relationships between partners--
shared understanding does. A thorough discussion at the beginning is a big
part of this, but it's important to have frequent chats to make sure the
partners understand the other's perspective.

The document MIGHT help avoid a lawsuit... Though I imagine a lot of people
might be lax on maintaining that shared understanding if they have the
document as a crutch.

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jon_dahl
Top 3 mistakes businesspeople make when forming partnerships:

1\. Trusting the relationship at the expense of a signed agreement: the
relationship is critical, of course, but relationships can change. So all
details should be spelled out on paper.

2\. Not getting adequate legal advice: your attorney can help with paperwork,
your structure (LLC? LLP?), and the terms between the partners.

3\. Assuming that good friends make good partners: they can, but friendship
and business partnerships are more or less orthogonal. And you don't want to
put yourself in a position where you make a bad decision for your business
because you won't jeopardize the friendship, or vice versa.

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michael_dorfman
Good list. Having been there myself, I'd summarize as "Trust, but verify". I
got screwed (royally) by my partner of many years, in part because there were
insufficient legal protections in place (which would have been trivial to
implement when times were good and everyone was friends.)

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adrianwaj
Wise Old Man: "You don't go into a partnership because you want to, you go
into one because you must."

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edw519
"Choosing the wrong partner."

duh

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mixmax
It's much more common than you would think though.

I've been guilty of it myself, and it is a lot harder than it sounds to pick
the right partner.

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akd
Well everyone knows it's a common problem, the thing is there is no solution
to the problem. Everyone tries to pick their partners well, some just do it
better than others.

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byrneseyeview
This is the second 'top 10' list you've submitted in under ten minutes.

