I'm aware that partnerships can be a problem.  I'm not exactly sure why though.  I'm intending to do business in January with a guy i was in school with.  we both have the same degree and share similar personal values.  What problems do people experience and how can i protect myself?  I have no reservations about the person i've chosen to do business with, but i wasn't born yesterday.  what do you have to say to me???

Quoted: I'm aware that partnerships can be a problem.  I'm not exactly sure why though.  I'm intending to do business in January with a guy i was in school with.  we both have the same degree and share similar personal values.  What problems do people experience and how can i protect myself?  I have no reservations about the person i've chosen to do business with, but i wasn't born yesterday.  what do you have to say to me???

The first thing that comes to mind is UNLIMITED LIABILITY.

Don't do it.  It's worse than marriage

Quoted: Quoted: I'm aware that partnerships can be a problem.  I'm not exactly sure why though.  I'm intending to do business in January with a guy i was in school with.  we both have the same degree and share similar personal values.  What problems do people experience and how can i protect myself?  I have no reservations about the person i've chosen to do business with, but i wasn't born yesterday.  what do you have to say to me??? The first thing that comes to mind is UNLIMITED LIABILITY. Don't do it.  It's worse than marriage

i forgot to mention that we intend to make our partnership an LLC.  Are there things I should do like require two signatures on a check?  How about a bank acct?  

If you have those kind of doubts, you will not have a happy relationship

Have you researched this at all? Google is your friend. So is a good lawyer. Get one.

Quoted: Quoted: Quoted: I'm aware that partnerships can be a problem.  I'm not exactly sure why though.  I'm intending to do business in January with a guy i was in school with.  we both have the same degree and share similar personal values.  What problems do people experience and how can i protect myself?  I have no reservations about the person i've chosen to do business with, but i wasn't born yesterday.  what do you have to say to me??? The first thing that comes to mind is UNLIMITED LIABILITY. Don't do it.  It's worse than marriage i forgot to mention that we intend to make our partnership an LLC.  Are there things I should do like require two signatures on a check?  How about a bank acct?

Why did you choose an LLC over a C or S Corp?

Quoted: If you have those kind of doubts, you will not have a happy relationship

i don't have doubts, i'm just cautious.

i also wear my seatbelt, but don't plan on having an accident.

Quoted: Have you researched this at all? Google is your friend. So is a good lawyer. Get one.

i've done some research, but am looking for someone elses experience and insight.

Quoted: Why did you choose an LLC over a C or S Corp?

mainly cost.  since it is only the two of us, no stocks will be issued.  LLC is far cheaper than an S corp and, i believe, provide the same liability protection.

Quoted: Quoted: Why did you choose an LLC over a C or S Corp? mainly cost.  since it is only the two of us, no stocks will be issued.  LLC is far cheaper than an S corp and, i believe, provide the same liability protection.

If Liability protection is important then definitely get a good business advisor. Using a certain type of entity is no protection if it is not treated & run as a separate entity from your personal banking; ie - an "incorporated pocketbook" is usually when courts look thru the entity & hold the owners liable.

For an LLC the management issue is member managed vs. manager managed; if it is two of you then you want an equal say in decisions. I also recommend a shareholder buy/sell agreement in any business if you do not own 100%.

Quoted: If Liability protection is important then definitely get a good business advisor. Using a certain type of entity is no protection if it is not treated & run as a separate entity from your personal banking; ie - an "incorporated pocketbook" is usually when courts look thru the entity & hold the owners liable.

A BIG +1 there.

Also, while setting up an LLC may be cheaper, don't ignore the superior tax benefits of a C-Corp.  It may be worth your while to use a corp depending on your circumstances.

The quickest way to make an enemy of a man is to either loan him money, or go into business with him.

Be very, very sure you two can work together.  Have a WRITTEN buy out agreement up front, that spells out exactly how one of you will buy out the other should you decide to part ways.  Specify how your share will be valued (multiple of sales, profits, $X per customer brought to the table, or whateve else you agree on) and how it will be paid.

Make sure the agreement stipulates each owner must offer their share to the other owner first before selling to an outside party.

Finally, go back and read the first two sentences.

Quoted: The quickest way to make an enemy of a man is to either loan him money, or go into business with him. Be very, very sure you two can work together.  Have a WRITTEN buy out agreement up front, that spells out exactly how one of you will buy out the other should you decide to part ways.  Specify how your share will be valued (multiple of sales, profits, $X per customer brought to the table, or whateve else you agree on) and how it will be paid. Make sure the agreement stipulates each owner must offer their share to the other owner first before selling to an outside party. Finally, go back and read the first two sentences.

i like your buy-out agreement idea.    Can you point me in the direction of finding out how to value a business?  We do not expect to have a huge inventory, nor will there be equipment to value.  We will merely be targeting a narrow, specific niche w/ customized clothing.  How does a person attach a value to a (hopefully) growing business?  

There are whole books written on business valuation. Browse through one, then you make a SWAG.

Quoted: There are whole books written on business valuation. Browse through one, then you make a SWAG.

what does the "S" stand for??

Quoted: i like your buy-out agreement idea.    Can you point me in the direction of finding out how to value a business?  We do not expect to have a huge inventory, nor will there be equipment to value.  We will merely be targeting a narrow, specific niche w/ customized clothing.  How does a person attach a value to a (hopefully) growing business?

Business valuation is tricky.  Some industries use a multiple of sales, some a multiple of profits, some base it on the number of customers, etc.

How you value the business is less important than getting both partners to agree up front to agree that's how it will be done.  A place to start would look at anywhere between 2-4 times net profits, plus inventory as a value.

There are a lot of books that discuss this.  Spend some time down at Barnes & Noble browsing through them to give you some ideas.

If the business isn't profitable, but growing then it's a little harder.  Ultimately, you want to look at the formula you've chosen and say that you'd be willing to both buy and sell your share of the business using that formula.

If you want to spend the money, you can also talk to business valuation guys - they are usually accountant, lawyers or MBAs who have specialized training in business valuations.  Check the phone book or ask your account and/or lawyer for references.