#253 Partnerships and Shotgun Clauses: Points to Ponder When Going Into Business With a Friend

There's something to be said about the security of partnerships. After all, those of us who have started something on our own know that is can be lonely out there in the entrepreneurial landscape. Some folks are blessed to have a spouse who gets it and can provide the support we need but there are many who feel like they're all alone especially when things aren't going well. Having someone to share the burden can seem attractive.

Starting something with a partner sounds like a great idea and there are times when it is a great idea. But only when it is done right. 

Lionel (fictitious character) went all in when his high school friend asked him to start a business. All in until it all went south.  It went south because him and his partner started out in a bit of a lovefest. They had complimentary skills and bringing them together was a great idea. There were so many things to do leading up to the big day "grand opening" that they hadn't gotten around to the partnership agreement. No biggie - they pushed it down the road because hey, they're besties and there isn't a situation where they can imagine not having one another's back. 

There's nothing that will make a friendship turn to hen$hiT as fast as a vested interest in money.

Fast-forward a couple of years and the partners begin to bicker over what to do with the retained earnings. Will it be "pay me first" or will we re-invest. They were at loggerheads - one in each camp. 

Not only that, their once bestie status was bursting apart at the seams - their difference of opinion on the matter had gotten so bad that Lionel dreaded the thought of going to the office.

Pause for a moment...what were the options. 

Points to ponder:

- when is the best time to hammer out the details of the agreement? When you're in the midst of the lovefest as BESTIES or when you're annoyed at one another?

- google "shotgun clause" and do you have one in your partnership agreement?

- what is the plan for spending your profits? 

- with no agreement, guess who gets to settle the dispute or dissolve the biz? Or a better question is - who gets the money?

Hindsight is 20/20.

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