Mistake #8 - Forming Partnership Without Proper Documentation

Something changed in your life and you decided to own a business. You could probably start from scratch, but considering all pros and cons decided to acquire an established business. Well, it's a very wise decision as long as you do it right. Unfortunately, new business buyers make many mistakes that make business acquisition much harder, some times causing substantial financial and emotional hardship, other times loss of otherwise promising business opportunity altogether.

Let's review 10 major mistakes that business buyers make that prevent them from successfully buying a business.

• Mistake #1 - Procrastination 
• Mistake #2 - Making Assumptions 
• Mistake #3 - Not Asking Right Questions 
• Mistake #4 - Being Overly Aggressive 
• Mistake #5 - Falling In Love With A Business 
• Mistake #6 - Not Being Able To Compare Businesses 
• Mistake #7 - Not Using Intermediary For Negotiation 
• Mistake #8 - Forming Partnership Without Proper Documentation
• Mistake #9 - Allowing Counselors Making Buying Decision
• Mistake #10 - Relying Too Much On Financial Documentation

Mistake #8 - Forming Partnership Without Proper Documentaton

Getting into a business is challenging and brave move. Quite frequently people partner up for a variety of reasons. Sometimes one partner puts in money and the other contributes time and knowledge. Other times it may be sharing responsibilities. One person may not have all necessary skills to start and operate a business. Putting together a team of like-minded individuals who collectively have what it takes may be the right solution as long as you do it right. What I mean by "do it right" is creating good buyout or, so called, buy-sell agreement. Don't neglect it even if your partners are your very best friends, or even family. Such agreement, drafted by good business attorney, can save you, your spouse and heirs a lot of time and money down the road.

Comprehensive buy-sell agreement will state in details rights and responsibilities of each partner and what should happen if one of the partners may decide to leave the business, somebody gets divorced, or sick and won't be able to work, or even die. Circumstances and people may change, and it's better to originally discuss possible solutions for undesirable situations. It's well-worth spending a few thousand dollars and get good business attorney for drafting a document that is finely tailored to your business situation. Don't use canned agreement downloaded from Internet. It's a complete waste of time and money and won't give you any protection.

Buy-sell agreement isn't a stationary document. If your business is changing, so should the agreement. A lot of bad experiences with partnerships is a direct result of not having comprehensive buy-sell agreement. If you decided to form a partnership, do yourself a favor and get buy-sell agrement, avoid any future misunderstandings and protect yourself and your family.