By Roshawnna Novellus, CEO of Novellus Financial.

Partnerships in business can make or break a company. Some entrepreneurial partners, such as Steve Jobs and Steve Wozniak, have seen enormous success. Facebook, on the other hand, almost disintegrated when the partnership between Mark Zuckerberg and Eduardo Saverin fell apart.

My first major business investment was a partnership. After completing my due diligence, courting period and personality analysis, I was sure that entering a partnership was the best decision. Unfortunately I was wrong, and had to exit the partnership quickly.

How can you be sure that your partnership will mirror success stories like Jobs and Wozniak? Learn the pros and cons, ask yourself honest questions, open a dialogue with your potential partner and then take preventative legal steps.

Partnerships in Business

Pros:

  • Partners can contribute capital.
  • They offer a built-in support system.
  • You can share responsibilities.
  • You generate more ideas and creativity.
  • Your business has access to a wider range of skill sets.

Cons:

  • There is shared control of the business.
  • There are shared profits.
  • You must compromise.
  • You both have joint liability.
  • There is potential for conflict.

One of the great things about partnerships in business is that you can easily overcome most of the cons if you have the right partner. Conflict is bound to happen, but if you're both skilled at working past it and at compromising in mutually beneficial ways, you can make it work.

Evaluating Your Skill Set

The primary step should be to evaluate the business and your individual skill set. You should ask yourself honestly if you need a partner and evaluate how you work with other team members. Come up with an initial timeline for the venture, and figure out what else you need from a partnership, such as technology expertise or capital, in order to fulfill well-rounded leadership. Once you determine that, you can look for a partner.

Choosing a Partner

Think of a business partnership like a marriage; you're going to be together for a very long time. Ideally, you want a business partner who will pick up the slack in areas where you're lacking, and vice versa. Trust, communication and respect are all essential components. You must be able to work happily with a potential business partner. In an ideal world, we would be able to work with anyone and everyone.

But that's not always the case. If you butt heads a lot before you embark on a business venture together, it might indicate issues later on. If, however, you help each other be better versions of yourselves, you will surely have a successful business partnership.

Taking Legal Steps

When forming a partnership, it is crucial to take care of the legal aspect. According to the Wall Street Journal, every business partnership should begin with a written agreement detailing exit clauses, compensation and individual roles and responsibilities. I recommend drafting this agreement with the help of a lawyer who specializes in partnerships in business.

Also, begin to plan for worst-case scenarios. Maintaining a positive outlook is essential to actualizing the goals of our personal and business lives, but that doesn't mean we should neglect to prepare for the possibility of failure or dissolution of the partnership. Create a plan just in case. This plan should include how you will handle the division of assets and liabilities. It should also detail who will maintain ownership of the company's property -- including intellectual property, graphic designs, equipment and customer lists.

Then, determine which of the three types of partnerships yours will be. Will it be a general partnership, a limited partnership or a joint venture? At this point, you should also consult with an accountant to learn about tax requirements and the best ways to handle the division of compensation.

The most important thing you can do is take your time before leaping into an entrepreneurial partnership. Consider your reasons for wanting a partner: Think about what you will each gain or lose by joining forces. Will the pros outweigh the cons? Are you both willing to compromise when necessary? Do you share a similar work ethic and have the same goals for the business? The members of an entrepreneurial partnership need to remain in sync for the business to be able to grow.

Dr. Roshawnna Novellus is the co-founder of Bootstrap Capital, Host of Startup Funding, and serves on the Commission on Women for Atlanta.

Published on: Apr 5, 2017