2 friends and I are starting a property renovation business where we help people with the designs and renovations with their own properties. We hope to one day to buy, renovate and sell properties as well and would like to get some advice on the things we need to consider in setting up the partnership?
Where to start..........
here is a small list of things that you need to firstly consider before you start trading:
*what structure is best? Partnership is easiest and cheapest but not often the best, especially if you dont like the thought of being personally on the hook for 100% of your business partners decisions
*Insurance: I hope you have PI and public liability, but what about income protection?
*decision-making: who makes the decisions? how are they decided?
*cash flow management
*dispute resolution (it wont be all beer and skittles, trust me!!!!)
*equipment/vehicle finance and expenses
the list goes on and on and on....and on......
The best thing you can do is collectively decide to go and see someone who can advise you on how best to set things up and assist with running the show. AND ACTUALLY GO!!! I have seen too many cases where one of the partners gets lumped with the tiresome job of talking to the bean-counter because the others are too busy faffing about with the business. A partnership has the potential to set you up for life or financially ruin all of you.....so it is CRITICAL that you are ALL on the same page at the outset.
remember that more than 80% of new businesses fail in the first 12 months. and as trite as it sounds the six P's can go a long way to ensuring you are the 20%, and even the 1% of that group that make a good return on the investment and RISK you are taking!!!
find a CA or CPA who wants to deal with a new business and can help you to grow over the long term.....in my experience, the big end of town with the mahogany wood paneling and Italian suits wont be interested......so find someone who has dealt with setting up and advising new ventures and be prepared to pay for the initial advice. It will be worth it!!!
As Brendan has articulated, this is likely to be a very long list. To me a very important thing that rarely gets enough thought and preparation is the exit strategy.
What do you do when one person wants to leave, to sell or to retire (or worse happens)
An old quote “everything ends badly, otherwise it wouldn’t end” is so very true in relationships of any kind so be sure to have everything covered and adequate insurances in place
Best of luck with it
Can't agree more with Brendan above! Find a decent business accountant local to you, and all three of you attend the meeting. You can each have individual advice if needed, but a good accountant should be able to look after everyones interests.
Do your business plan and make sure you all have similar business expectations/directions. Plan for the longer term as well as next couple of years, exit strategies etc.. Better to deal with these issues now than down the track, when friendships can be easily fractured. Will be worth speaking to solicitors that set up structures to assist with these types of agreements.
Best of luck with the venture!