Discuss everything in detail

The end should be happy.. (last part)

"You're fooling yourself if you think there's never going to be a disagreement." That turned out to be a smart move. The incorporation process forces partners to face tough issues right at the outset, says Richard Harroch. Incorporation documents will clearly define the specific roles each partner is expected to play, as well as address other issues like how to bring in a third partner or drum up additional financing. While a general partnership agreement may seem like a simpler, more affordable option, such agreements often cause trouble in the long run because they are too broad, cautions Harroch. Ambuehl and Clark faced one of the toughest questions when launching ATM Express. Their main investor asked, "What happens if the two of you get to a point where you don't want to be partners anymore?" Ambuehl and Clark answered the question by drafting employment contracts that locked them into the partnership for five years.

Discuss possible exit strategies. It seems counterintuitive, but the best time to begin exploring exit strategies is at the outset. Of course, in a perfect world, all partnerships will last until the parties involved are ready to sell or merge or otherwise move on to new things. But it's seldom that simple. Indeed, the more likely scenario is that one partner will wind up buying out the other, so it's wise to put a buy-sell agreement in writing at the outset, says Cliff Risman, of Gardere Wynne Sewell, a Dallas-based law firm. The buy-sell is a mechanism by which partners agree in advance that should a dispute arise later on, one partner can buy the other out. "If you don't," Risman says, "you're leaving yourself open to the worst-case scenario -- where a jury of your peers will decide it for you."

Agree to disagree. Back in Billings, Ambuehl and Clark aren't too worried about their disagreement over the acquisition. When they founded their business five years ago, they decided that they would make a major move like an acquisition only if they both agreed on it. "If there's no agreement, there's no deal," Clark maintains. "That's the solution." Whether or not they decide to make the purchase, both men are convinced that their partnership -- and their company -- will survive. "You're fooling yourself if you think there's never going to be a disagreement," Clark says. Ambuehl agrees: "Neil and I don't draw lines in the sand and say, 'This is the way it is, period.' We don't try to back one another into a corner. We know we have to bend."

By: Dimitra Kessenides

The Advantage and disadvantage of Partnership

One big advantage of a general partnership is that you don't have to register with your state and pay an often hefty fee, as you do to establish a corporation or limited liability company. And because a general partnership is normally a " pass through" tax entity (the partners, not the partnership, are taxed unless you specifically elect to be taxed like a corporation) filing income tax returns is easy. Unlike a regular corporation, there is no need to file separate tax returns for the corporate entity and its owners.

But given that the business-related acts of one partner legally bind all others, it is essential that you go into business with a partner or partners you completely trust. It is also essential that you prepare a written partnership agreement establishing, among other things, each partner's share of profits or losses, day-to-day duties and what happens if one partner dies or retires.

A major disadvantage of doing business as a general partnership is that all partners are personally liable for business debts and liabilities (for example, a judgment in a lawsuit). While it's true that a good insurance policy can do much to reduce lawsuit worries and that many small, savvy businesses don't have debt problems, it's also true that businesses which face significant risks in either of these areas should probably organize themselves as a corporation or LLC.

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