Has anybody here ever gone into business with a partner? If so, how did it work out? I will be going into business with a partner and would be interested in hearing any words of caution that you may have.

We won't be starting a full blown operation, it will just be a small construction company with a fictitious name so that we can open a business checking account for tax reasons. Basically my dad who owns Pacific Northwest Buildings on Boise will be selling the buildings and we will be a crew that works under contract to build them for him. We hiring the occasional 3rd man to help out on bigger jobs.

My dad is guiding us through the process and he is a successful business man, I'm just interested in hearing about other peoples experiences when running a business with a partner. Eventually I will be taking over Pacific Northwest Buildings and when that time comes I won't want to have a partner. I don't want there to be any conflicts when I inherit the business and leave the partnership if the business that we're starting behind. That's a long way down the road but is something to think about I'm sure.

billmasters:

Since I don't know what your background is, I'll offer what I know from the money mangagement perspective. I don't have any personal experience, however I've been in the construction industry for over 20 years and know the pitfalls some of my customers have run into - with or without partners.

I'd recommend putting everything in writing. If you plan on your partner being temporary, even if the period is 20 years, you need to have some understanding, up front, so you don't find yourself in a legal battle, down the road. Make sure it's completely separate from your dad's company so there won't be any questions.

The other thing you could do would be to form an LLC (limited liability corporation), again, under a separate company from your father's. That way, when the time comes to dissolve your partnership, there won't be any expectations, or obligations, attached to your dad's company.

No matter how casual the relationship, you need to have something in writing to protect both of you. Neither one of you can run out on the other and leave one holding the bag (I've heard this more times than I care to count). It would also be an excellent idea to include specific duties. If you're good with figures, and money management, and your potential partner isn't so good, but is a great sales person, it would make the most sense to draw on each other's expertise. Again, put it in writing, so there's no chance of misunderstandings down the road.

The quickest way to fail, in the construction industry, is poor money management. My expertise is Commercial Credit so I know whereof I speak. Don't use draws from one job to pay for another; it's better to be late, if you receive your funds late, than to rob Peter to pay Paul. I run into this all the time, and am constantly educating my customers on how to avoid the holes they dig for themselves.

Hope this helps a little.

Thanks sonnet26,

My dad has also been in the business for 20 years and he has told me about much of what you caution. He's a smart man!

I've been working with the crews and I know what you're talking about with the draws. My dad has one building going that he is actually loosing money on. It's a beautiful building! The man that bought it owns the biggest window washing business in Seattle and has become a close personal friend of my dad. My dad is almost more likely to take a loss than to have an unhappy customer. He treats his crews the same way. The crew that is building this building has already drawn out all of the money that they were offered when they took the job. It's in a remote area in the mountains and winter snow made it impossible to get a crew up there. Now the crew is working in a financial hole just to save their reputation.

My dad will never start a building in that region again unless it's the right time of year. So I'm definitely learning from people that have been through the fire.

Had some good partnerships and some bad ones. One thing you can generally predict - you can't predict everything.

I think that the single most crucial thing to have in a partnership agreement is a straight to the point, down and dirty, "buy/sell" agreement. That means - when there is a disagreement and all else fails; party 1 can invoke the buy/sell clause for whatever price he thinks is fair - and give party 2 the opportunity to either sell his interest to party 1 or buy party 1's interest for that price.

It's a crude tool, but just having tends to keep both parties in line.