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Two Keys to a Successful Partnership: Shared Equity (Equity Split) and Resolving Disagreements – by Dorene Lehavi, PhD

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While not the only two vital components to successful business partnerships, shared equity (equity split) and resolving disagreements through written partnership agreements are essential when embarking upon new business ventures.

[fancy_heading style=”style1″ size=”medium”]Shared Equity[/fancy_heading]

It is imperative that business partners address how they will divide the equity of their business. Any numbers will work as long as all partners are in agreement. For example, when Linda and Ryan first decided to become business partners, both understood their complimentary skills, unique talents, and various amounts of time each would spend in the business could not be measured. Both accepted the necessity of the others’ contributions and agreed on an equal equity share of 50/50. As a ‘win/win’ attitude was the most agreeable to both Linda and Ryan, this equity split allowed them to sustain a positive partnership, which extended to positive relationships with their vendors, employees, and customers for eight years.

[fancy_heading style=”style1″ size=”medium”]Resolving Disagreements: Written Partnership Agreements[/fancy_heading]

Written agreements are essential for business partners in order to most effectively plan out the details of their business.  Linda and Ryan agreed on a 49/51 disagreement split, which was written into their partnership agreement to proactively address a deadlocked disagreement situation. This agreement allows for the person with the greatest expertise in the disputed area to have the right of final decision. Within their partnership agreement, Linda and Ryan wrote down their areas of expertise. They also wrote in areas beyond their knowledge and experiences so that, in the event that no agreement could be reached, a third party expert could be called upon for assistance.

One of the main challenges business partners may face is blaming each other for not doing what they promised. However, with a clear written partnership agreement signed by all partners, there is a much greater chance that misunderstandings and forgetfulness can be avoided.

Using these two methods will help you plan for a successful business partnership from the beginning.