What is the most important discussion when starting a business?  Are you wondering what to ask a business partner before you sign papers to start your business in San Diego?  When forming a business in San Diego, everything you do from the first step on is in some way forming and impacting the business for the future. Ground rules are being established for managing and controlling the business and it’s interests. Definition in regards to the relationship between the partners and any shareholders is crucial to get right during this time. Depending on the level of clarity, asking the right questions up front can alleviate many issues down the road and keep the company doing what it was intended to do.

Mo’ money, Mo’ problems

Perhaps the most important discussion when starting a business with a business partner before you sign papers is “How will the money be handled?”  You need to discuss and commit to writing the decisions you and your partner(s) agree upon regarding all financial issues and the handling of the money in your new company. Learn about the prevention of “commingling” and managing theft in order to help keep your financial house in order.

Starting a business is complicated enough, but throw a bunch of money into the mix and often times it’s enough to drive a company under or force its partners to dissolve. “How will money be handled” is perhaps the most important discussion when starting a business. Here are a few questions to get you started:

• Who is bringing money in to the business?
• How will you pay for expenses?
• How will profits be divided up?
• At what point will you start drawing paychecks from the company?
• Who’s name will accounts, credit cards and loans be in?

 

Know Your Role

Another great question to ask a business partner before you sign papers is what role each investor and partner will play in the new venture?  How will performance be measured?  A great place to start is drafting some clear job descriptions. Know who is responsible for what so that key functions or responsibilities aren’t falling through the cracks. This also helps create good definition between you and your potential business partner as to what each of you will be assuming responsibility for and what you expect of one another.

Another thing to discuss is how will key business decisions be made. Who is involved in decisions regarding structure, hiring, firing, corporate purchases, etc? Topics like these are essential to have clarity on. You might even consider taking 2-3 days and focusing on the issues of money and roles. Force yourself to address as many hypotheticals as you think are possible in the future of your company in this regard.

Settling Your Differences

No matter how good the relationship is before entering into a business partnership, there will undoubtedly be moments and situations where tensions will arise. No two people see eye-to-eye in every situation 100% of the time. So while everything at the outset might seem like roses, you’d better have a plan in place for differences in opinion. What is the most important discussion when starting a business in San Diego and Southern California? How will you handle partnership disputes and disagreements?  Agree ahead of time how ties in voting will be established, or how a board of directors might help these type of situations and you may even consider discussing with an attorney up front to outline an agreed upon set of standards or procedures for dealing with business disputes.

For more than 40 years, the Watkins Firm has been helping individuals and partners throughout California establish businesses and create business contracts, employment agreements and bring needed definition to the company before it even gets started.

We invite you to review our podcast Episode 2 – Starting a Business as well as the strong recommendations of our clients and contact the partnership and business attorneys at the Watkins Firm or call 858-535-1511 for a free consultation.