50/50 Business Partnerships: the good, the bad and the ugly
When two professionals enter into a business venture together, the last thing on their mind is how it could all go wrong. When a business is born from a brilliant idea, the road ahead seems paved with golden opportunities and success stories.
Happy customers, healthy expansion and new horizons make the early days of a start-up an exciting time to be in business, and the sense of teamwork can be addictive. When both partners work well together and their business takes off, it’s like a sickly sweet rom-com or that couple you know that buys everything in a matching set.
Just like a marriage, a 50/50 business partnership is built on trust. Without it, it’s only a matter of time before those productive afternoons and Excel spreadsheets you actually enjoyed putting together are soured by the costly conflicts that stood in the way of success. Of course, it doesn’t have to be this way.
With the right legal frameworks in place, a 50/50 partnership can be highly beneficial: as well as greater stability in business vitality, the partners can enjoy mutual support and share the burden of start-up costs, risks and responsibilities.
Two heads are often better than one, which makes a two-person business venture better positioned to solve challenges and innovate than a founder going it alone. Granted, these pros exist in business relationships that don’t necessarily have a 50/50 split – however, the sense of comradery is elevated when both parties have the same vested interest in the company.
A business with an equal 50/50 partners is a unique relationship: it relies on consent, and neither partner can do anything without the approval of the other unless they establish clear, distinct areas of responsibility. The problem is, very often, business partners don’t really agree to anything before they become partners. An idea is born and quickly grows; both partners rush to get it off the ground and kept a focus on building the brand and its loyal customer base.
Before signing a shareholder’s agreement, both partners must clearly understand each other’s goals in terms of dilution, salary, exit and commitment. Any discrepancies here will undoubtedly rear their ugly head in the future, resulting in very high levels of stress and an increase in the chance of failure.
Later down the line, equal partners could come up against deadlocks and disputes when they cannot agree on a decision, and confusion among employees with regard to who is in charge could cause further friction between the founding members of a 50/50 partnership. While the benefits of an equal partnership are significant, taking precautions to avoid conflict is key.
At 360 Law Group, our specialist lawyers are equipped with the legal expertise and business acumen necessary to advise and assist you in negotiating and drafting a watertight shareholder agreement that mitigates the risk of disputes. With a partnership agreement in place and the potential problems addressed well in advance, founders are free to pursue their venture and profit from their success.
Setting up a business? Get in touch with our team today on 0333 772 7736.
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