Partnerships can be complex. Adding an employee can be disruptive enough, however, a partner can create an upheaval. That said, a partner can be indispensable to growing your business. Your partners aren’t just those working with you at the top, it’s your manufacturers, and such.
Finding the right partner could let your business grow beyond your expectations or levels you might not reach by yourself. A partner also allows you to have someone you can empathize with, and divide the duties. Of course, it’s not all sunshine and unicorns. You need to be careful who you bring aboard as they may go from your greatest ally to your worst nightmare. Before you leap into that partnership, here are some things to consider.
You should always protect yourself legally, even if you’re getting along with your partner before joining forces. Too many people shy away from a legal contract with too much detail, believing such contracts exemplify an absence of trust. This just is not a good idea.
If the partnership collapses, your partners’ responsibilities are to themselves or their investors to ensure they get the most out of the collapse as possible, as well as your responsibility. Your trademarks represent ownership of your company and what you do. By not protecting those trademarks, former partners can claim ownership, and while you might win the legal battle, you may lose the war by crippling your business with legal and other fees.
If may be a good idea to have any trademarks owned by another company, and have your operating company pay the other company royalties or licensing fees.
Whether your partner is human or a corporation, trust is mandatory for it to survive. That doesn’t mean you give away the farm (so to speak), so they don’t get to learn the many things about your business. After all, it’s still your small business. You should only give away what you must, however, be overly cold about it. Ask your potential partner what they need to know to ensure things to gently. For anything sensitive that you may need to share, get the new partner to sign a non-disclosure agreement, and anyone else relevant.
Ideas are at the heart of any small business, which makes them incredibly desirable. Be assured if you don’t protect your ideas, someone else will steal them. Potentials partners could take your ideas and start their own business, especially if they believe you can’t handle it, and if you don’t protect your ideas.
It may not be something you’d think someone would do, but if someone can get an advantage, they’ll probably take a shot. Don’t let partners have the opportunity of using you as a jumping-off point; protect your ideas at all costs. There are ways to work around a patent, most notably if they were there from the beginning, however, the fact that patents exist can avert legal battles from cropping up in the first place.
Having a partner means you’re putting your small businesses future in their hands. The same with a manufacturer, you put the quality of your product in their hands. You don’t want to let just anyone get a piece of your dream, so it just makes sense to do your due diligence. You need to do research on any potential partners. Get references from previous businesses or jobs they’ve worked with, and chat to them so you get a feel for how the will fit you and your small business. You may even want to do social media and background checks to ensure they’re on the up and up.
Non-competes / Non-solicitations
At some point in your business employees or partners will exit. That’s all-in course of running your business, and you do get used to it. What is harder to get used to is seeing them using their training and knowledge to join the competition right after the exit, or worse, starting their own business. It’s not just your ideas your former partners have their eyes on, it’s your top talent too. A non-competition or non-solicitation agreements limit the liability a former partner or employee represents, and can keep your company safe. Always get legal advice on any non-compete agreement you’re preparing.
Partners can be a crucial component of your small business. Your partners, including the ones you do business with, embodies your potential growth and ability to do great things. Sadly, if the times turn bad they can turn on you too. Always work to protect yourself for most contingencies. It is your business after all.
Do You Know Why the CRA Uses a Profit Test for Business?
What is Income Splitting and How Can it Reduce Your Tax Bill?
Self Employed? Do You Know What Your Tax Obligations Are?
How Can You Claim Expenses on a Business Loss?
What are Input Tax Credits?
Tax Strategies to Reduce Small Business Income Tax
10 Red Flags That Can Trigger a CRA Audit For Your Small Business
Common Income Tax Business Deduction Myths