How to Find a Business Partner (and vet them)

A good business partner can help your company grow or expand by bringing in new skills, capital and connections. You can establish your business as a partnership from the start or bring someone in when you are ready to undergo a new round of funding or expand into a new market. When you’re ready to find a business partner, understanding what to look for and where to begin your search can make the process easier.

 

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Definition of a business partner

A business partner is someone who shares the risks and responsibilities of your company with you. Business partners typically share management duties, though they may split particular duties based on each individual’s strengths and weaknesses. Partners also share the profits made by the business and are identified as co-owners on formal paperwork. A business partnership is established using a legal contract. There are four main types of business partnerships:

 

General partnership (GP)

A general partnership is the simplest type of partnership. In a GP, two or more individuals agree to a contract specifying each person’s roles and responsibilities in the venture. A GP doesn’t require business registration with your state and everyone in the partnership has the ability to make contracts or take on debt for the business. Each member is also responsible for all debts and liabilities incurred by the company.

 

Limited partnership (LP)

A limited partnership is a type of business registered with the state that has one person acting as the general partner who runs the company and others who contribute money as investments but do not actively run the business. The limited partners get money from the company’s profits as a return on their investment but are not responsible for the company’s debts or liabilities.

 

Limited liability partnership (LLP)

A limited liability partnership is similar to a general partnership but has formal recognition by the state as a business entity. The partners all help run the company and are responsible for debts and liabilities of the company as a whole, but are shielded from some liabilities caused by other partners’ errors or omissions. Some states disallow this type of partnership, and some states limit LLPs to specific job classes, such as lawyers, architects or doctors.

 

Limited liability company (LLC)

A limited liability company is a type of business structure that can be used by partners or a single owner. In an LLC partnership, the owners are shielded from personal responsibility for the company’s debts and liabilities. Essentially, an LLC sits somewhere between a simple partnership and a corporation in terms of business structure.

 

Qualities of a good business partner

When you’re searching for a business partner, one of the most important aspects to consider is what the other person can bring to the company that you can’t necessarily provide yourself. You might be skilled at budget management but need support with employee relations or vice versa. Because a partnership involves two unique people working together toward a common goal, the ideal partner for you may not be the best partner for someone else. A good partnership also involves complementary personalities, values and work philosophies, since you are likely to work closely with your partner for years to come. Look for these qualities when choosing a business partner:

 

Someone you can trust

You’re putting the success of your business in your partner’s hands and you’ll be sharing the trials and tribulations of running a business for years to come. Pick someone you can trust to handle unexpected emergencies as well as day-to-day tasks.

 

Personality traits that work with yours

Some people like a no-nonsense attitude, while others prefer a more casual interaction, so you need to pick someone with a personality that matches yours. Your business partner is someone you interact with every day and having different communication styles or attitudes can make the process of running your business much more difficult.

 

Passion and drive

Choose a business partner who is excited about your company or idea and who really wants it to succeed. A partner who feels passionate about the company and has a strong drive to succeed helps push your partnership and your business through hard times and increases your chances of long-term success.

 

The willingness to put everything in writing

A formal contract protects both you and your partner since all expectations are clear from the start. Being willing to discuss and agree on parameters such as when to seek out more funding, how to handle compensation if the business isn’t bringing in any money and who is responsible for specific duties helps the entire partnership work smoothly.

 

Red flags when considering a business partner

Choosing the right business partner can affect the long-term success of your company, so you should weed out partners that might pose a problem early in your search. Some red flags that might give you pause when you’re trying to find a business partner include:

 

Bad previous financial decisions

While many people make poor financial decisions during their younger years, more recent financial troubles or major financial issues can indicate a problem handling money. Research your potential partners before signing a partnership agreement and look for bankruptcies, a poor credit history or significant debts.

 

Conflicting values

A partner who brings in a new perspective can help your business thrive, but if a partner’s values differ significantly from yours, that could become a source of conflict in the future. As an example, if you want to build a business to pass on to your children but your partner wants something to sell to a larger company later, then your goals may be fundamentally incompatible. You should at least agree on issues such as the long-term vision for the company and how you plan to handle financial issues that might arise.

 

Unwillingness to compromise

If your potential partner comes in with ideas and plans but won’t listen to any of yours, that isn’t a good basis for a long-term business partnership. No matter how innovative or game-changing your partner’s ideas may be, it isn’t worth the struggle of fighting to have your own ideas heard. An unwillingness to compromise might come into play in other ways as well, such as being unable to effectively negotiate with suppliers or clients.

 

Poor communication skills

A good partnership requires good communication, so you need a partner who is truthful, straightforward and proactive about communicating with you. Lying and hiding things are obvious red flags, but you should also be concerned about a partner who doesn’t respond to calls and emails within a reasonable period or who gives shifty, incomplete answers when you need a definitive response.

 

Unbalanced skill sets

Your business partner should complement your own skills and abilities, not conflict with them. Having similar skills may help you get along, but it can lead to certain aspects of your business getting overlooked. Finding a partner who can make up for any deficiencies in your own skill set helps give you each specific areas of focus within the company. Division of work is another area where an unbalanced partnership might develop. If one partner is doing most of the work, this can lead to resentment.

 

Where to find a business partner

Once you’ve decided to create a partnership to grow your business, then how to find a business partner becomes your next step. You can find potential partners through your own network, or you can broaden your search by advertising for a partner. Some good places to look for a business partner include:

 

Consider former clients

Previous clients might be interested in partnering with you, and long-term clients likely know your business well already.

 

Touch base with former coworkers

Partnering with someone that you’ve previously worked with can be a great long-term business decision.

 

Consult with legal or financial professionals

Your accountant or lawyer may know someone who is a good fit for your business partnership, and financial professionals you already work with know where your own business strengths and weaknesses lie.

 

Look up former business contacts

Someone who once owned or managed a business you worked with may be an ideal candidate for a new partnership. Even if your direct business contacts aren’t interested, they may be able to make suggestions or arrange an introduction to someone who is.

 

Spread the word about your search

Make sure everyone from your former classmates to your book club members know that you’re searching for a partner. Someone might have a personal connection with the perfect candidate even if you don’t already know the person.

 

Think about friends and family

Forming a partnership with a friend or family member may be the easiest way to find someone you know well that shares your values and outlook. The right person could be already within your immediate network, but there are some potential drawbacks to choosing a friend or family member as a partner. If the partnership fails, it could damage the personal relationship as well.

 

Attend networking events

Local business events designed for networking provide an opportunity to meet like-minded people in your industry that might be interested in partnering with you on your latest business venture. Online networking groups are another place where you might find potential partners.

 

Hire a broker

A broker can help expand your search to people outside your extended network. These professionals are typically involved in the buying and selling of businesses but could also help you with a partner search. It can be expensive to hire a broker though, so you need to make sure it is within your budget before doing so.

 

Check out a partner matching website

Partner-matching websites include databases of people searching for business partners. You can search by business niche or geographic area to find other people looking for partners, or put up your own information to let interested candidates come to you.

 

How to perform due diligence on a potential business partner

Vetting potential business partners helps ensure that your new partner becomes an asset to your company instead of presenting new challenges. Due diligence involves performing background checks and personal interviews that give you an inside look into what the partnership might involve. Public records and police reports can help you vet the candidates you’re considering. Look at a potential partner’s social media accounts to unearth any potential issues and get a feel for the candidate’s personality. Some possible problem areas you might need to investigate include:

  • Financial problems
  • Current or prior lawsuits
  • Marriage problems that could lead to financial difficulties in case of divorce
  • Prior arrests or convictions
  • Public image issues, such as blatant racism or sexism posted on social media

FAQs

 

How can someone become a business partner?

To become a business partner in an existing business, you need to talk to the current owner or owners and determine whether they are seeking out new partners. You should retain a lawyer before trying to become a business partner or starting your own partnership so you avoid any potential legal pitfalls.

 

What are the disadvantages of a business partner?

While partnerships can be highly productive, there are some downsides. The main disadvantages of a business partner include:

  • Not being able to make decisions about your business on your own
  • Having to share the profits your company makes
  • The potential for major disagreements that could affect your company
  • A higher tax burden than if you formed a corporation instead
  • The possibility of having to dissolve your business if one partner quits or dies
  • Having to take on liabilities of the partnership and being responsible if your partner does something to damage the business

What is a silent business partner?

A silent business partner is one who contributes money to the company but does not participate in the day-to-day affairs of the business. Someone might seek out a silent partner to provide the capital to start a business or bring on a silent partner to help fund an expansion. A silent partner is basically an investor in your business. The silent partnership agreement is a legally binding contract and should spell out the compensation the silent partner expects for their initial contribution.

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