003 FRIENDS AS BUSINESS PARTNERS
Very often we come across friends starting businesses, forming partnership firms. Some of them develop into great businesses and some die soon. Reasons for prosperity as well as failure are numerous.
Here is a beautiful article by Shri Jeff Cornwall, Director, Belmont University Center for Enterpreneurship.
http://forum.belmont.edu/cornwall/archives/002329.html
In addition to the guidelines given by Mr. Jeff Cornwall, I wish to add the following precautions:
1. Better to start businesses only with longstanding tested friends, say of more than five years relationship. Care should be taken while entering into partnerships with class mates/school mates/college mates who shifted to other places for some years and have come back in a new incarnation. They might have acquired new habits, beliefs, ethics and work methods. We have to again spend one or two years with them studying their habits.
2. Better to reproduce every term and condition into writing. Oral agreements can create disputes and misunderstandings which paralise businesses.
3. Better not to finalise business proposals in bars, while drunk.
4. Better to have at least two independent persons as observers/witnesses while finalising the partneships. Their help can be taken when disputes arise.
5. Must always be kept in mind
Partnership laws in most countries stipulate unlimited liabilities for partners. That means personal assets can be attached by creditors for satisfying partnership debts. This liability will not be proportionate to the ratio of sharing of profits and losses. That means even if a person has 1% share in profits, he may be called on to pay 100% liabilities of the firm, from his personal assets.
Here is a beautiful article by Shri Jeff Cornwall, Director, Belmont University Center for Enterpreneurship.
http://forum.belmont.edu/cornwall/archives/002329.html
In addition to the guidelines given by Mr. Jeff Cornwall, I wish to add the following precautions:
1. Better to start businesses only with longstanding tested friends, say of more than five years relationship. Care should be taken while entering into partnerships with class mates/school mates/college mates who shifted to other places for some years and have come back in a new incarnation. They might have acquired new habits, beliefs, ethics and work methods. We have to again spend one or two years with them studying their habits.
2. Better to reproduce every term and condition into writing. Oral agreements can create disputes and misunderstandings which paralise businesses.
3. Better not to finalise business proposals in bars, while drunk.
4. Better to have at least two independent persons as observers/witnesses while finalising the partneships. Their help can be taken when disputes arise.
5. Must always be kept in mind
Partnership laws in most countries stipulate unlimited liabilities for partners. That means personal assets can be attached by creditors for satisfying partnership debts. This liability will not be proportionate to the ratio of sharing of profits and losses. That means even if a person has 1% share in profits, he may be called on to pay 100% liabilities of the firm, from his personal assets.
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