Many business owners start or purchase businesses as 50-50 partners, as in, “I own 50.0%; you own, 50.0%.” What do I say to business owners BEFORE they enter into such an agreement? DON’T DO IT!!
A Majority Is Needed
Someone MUST take the lead. That means someone must have majority ownership. Majority may be 51%; it doesn’t need to be 90/10 or 60/40. Someone just needs to have a majority. In order for a business to successfully work, each and every time there is a lack of agreement or a dispute, someone must make the final decision. How is this done? Usually, it is done by majority! If there is no majority, what do you do? You take much longer to make decisions, major decisions sit and fester, and resentment grows.
Options / Alternatives
There are options to a straight, across the board majority. These involve segmenting the business into functions or departments and assigning a majority to the co-owner/co-founder that presides over or is in charge of that function or department.
Do you want to know why a fully equitable split is not recommended? (Not just by me, but by so many other lawyers, advisors, and former business partners) Watch the short video for the reasons and additional insights and tips.
Do you have any additional insights or experiences you’d like to share? Please do so below!