From the course: 20 Questions to Help You Start a Business

Are you going to have partners?

From the course: 20 Questions to Help You Start a Business

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Are you going to have partners?

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- When you start a new business, it's really important to know who your partners are going to be, and what each partner needs to do in order to earn their shares. Are you planning to fly solo, or are you going to have partners? I want you to consider some important factors. Some new entrepreneurs just give everyone equal shares. This seems like the fair and logical move. But this isn't always wise. Yeah, it can work when you've got two people that are equally responsible for everything and put up the same amount of money. But most situations are more complicated. You want to have an honest discussion with your partners and co-founders about what is expected. My advice on the subject is to have everyone involved sign an employment agreement and have their shares vest over time to ensure that they stay involved. Imagine this, you and two buddies start a business and you each have one third of the equity, but one of the partners spends his time golfing instead of working. What can you do? You can't take his stock back. If you try to kick him out, he or she still owns the stock. This isn't the hypothetical, it's real and it's more common than you think. Having partners can give you a real leg up, but you need to do it right to protect yourself and your business. You should draw up an agreement that spells out the responsibilities and expectations for everyone involved in order to get their share of the company. Okay, so consider that as your formula for your business and you'll feel good knowing that you are reasonably protected.

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