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Why are people inclined to get business partners? It's a TERRIBLE idea. In general you should NEVER get a business partner.
1. It requires that the partner benefit you more than the cost of giving up ownership. If you give up 50% of your company then the company would have to earn 100% more profit for the partner to be beneficial to you.
2. You usually can get an employee instead of having the skills that the person offers.
3. Most business partners do not have a business already either because they are new entrepreneurs or their past businesses were total failures. In other words they don't know what they're doing. Why would you partner with someone who never started a successful business before?
4. Lots of legal issues. For example you can't open up another business that's similar without risking a lawsuit from a business partner.
5. If a partner doesn't do anything and you have to do all the work then you have little recourse.
6. Legal costs should be higher since the operating agreement should spell out if money can be contributed for a percentage of ownership. If you get a boilerplate operating agreement from Legalzoom for example it might not have the provisions needed to protect you from getting screwed over.
7. Your partners might want a salary when the company is low on funds or blow money on worthless stuff.
8. Time is wasted with partners when it could be focused on the business.
9. You have less control of your business. More than likely a bad thing.
10. Partners can raid corporate bank accounts and run off with the money. If you wouldn't trust a business partner with $20,000 of your own money under their bed then you shouldn't have them as a business partner.
11. The business partner who actually wants the business to succeed will be doing most of the work.
12. Ever go to any business networking events? Total losers everywhere. What ends up happening is that the 50yr old sandwich shop guy gives you a brochure to go to his hole in the wall sandwich place. It's just business people trying to advertise to get more business. These are the same kind of people who want to be a business partner. No thanks. I don't want to end up like that.
13. You basically admit that you can't open a business on your own because you're too stupid to do it yourself so you need the help of someone else. Only problem is that someone else doesn't know either.
14. Multiple business partners virtually guarantee your failure. If there are 10 business partners or lets say 4 business partners with VC and you're left with 10% ownership then even if the business makes one million net income you'd only get $100,000 and a job basically. Not many businesses ever make it close to that level to begin with. You'd be better off if you started the business yourself but it only made $120,000 profit.
So in general I would say that you should avoid taking on business partners. Does anyone else have experience with business partners?
1. It requires that the partner benefit you more than the cost of giving up ownership. If you give up 50% of your company then the company would have to earn 100% more profit for the partner to be beneficial to you.
2. You usually can get an employee instead of having the skills that the person offers.
3. Most business partners do not have a business already either because they are new entrepreneurs or their past businesses were total failures. In other words they don't know what they're doing. Why would you partner with someone who never started a successful business before?
4. Lots of legal issues. For example you can't open up another business that's similar without risking a lawsuit from a business partner.
5. If a partner doesn't do anything and you have to do all the work then you have little recourse.
6. Legal costs should be higher since the operating agreement should spell out if money can be contributed for a percentage of ownership. If you get a boilerplate operating agreement from Legalzoom for example it might not have the provisions needed to protect you from getting screwed over.
7. Your partners might want a salary when the company is low on funds or blow money on worthless stuff.
8. Time is wasted with partners when it could be focused on the business.
9. You have less control of your business. More than likely a bad thing.
10. Partners can raid corporate bank accounts and run off with the money. If you wouldn't trust a business partner with $20,000 of your own money under their bed then you shouldn't have them as a business partner.
11. The business partner who actually wants the business to succeed will be doing most of the work.
12. Ever go to any business networking events? Total losers everywhere. What ends up happening is that the 50yr old sandwich shop guy gives you a brochure to go to his hole in the wall sandwich place. It's just business people trying to advertise to get more business. These are the same kind of people who want to be a business partner. No thanks. I don't want to end up like that.
13. You basically admit that you can't open a business on your own because you're too stupid to do it yourself so you need the help of someone else. Only problem is that someone else doesn't know either.
14. Multiple business partners virtually guarantee your failure. If there are 10 business partners or lets say 4 business partners with VC and you're left with 10% ownership then even if the business makes one million net income you'd only get $100,000 and a job basically. Not many businesses ever make it close to that level to begin with. You'd be better off if you started the business yourself but it only made $120,000 profit.
So in general I would say that you should avoid taking on business partners. Does anyone else have experience with business partners?
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