Partners starting a joint venture tend to agree easily on the opportunity and put off the awkward questions. Those questions rarely disappear. They return later, when the business is under pressure and the relationship is least able to absorb them.
What is the venture for, and for how long
Write down the purpose in a few sentences and say what the venture will not do. Decide whether it is meant to last or to finish a defined project, because the answer changes almost every other term.
Who decides what
Separate everyday management from decisions that need both partners to agree. Agree in advance what happens if the partners deadlock on an important matter, instead of discovering the answer in the middle of the disagreement.
Money in and money out
Be clear about what each side contributes, whether in cash, assets or work. Decide how further funding is raised if the venture needs it, and how profits are distributed or kept in the business.
How a partner leaves
Every venture should say what happens when a partner wants to exit, cannot continue, or wishes to sell to a third party. Rules on transfers, on who is offered the share first, and on how it is valued are much easier to agree before anyone is leaving.
Questions worth asking at the first meeting
- What does success look like for each partner, and by when?
- Which decisions need unanimous agreement?
- How is a deadlock resolved?
- What happens if one partner cannot or will not contribute more funding?
- How does a partner exit, and how is the share valued?
None of these conversations is pleasant, and all of them are cheaper at the start of a venture than in the middle of a dispute.
This article offers general information only. It is not legal advice, and the right answer depends on the facts of each case.
