This text might have been titled “The Pros and Cons of a 50/50 Equity Partnership”, however the cons far outweigh the pros. When partnerships are fashioned, the obvious considerations are addressed. How do every accomplice’s expertise-set and experience complement each other? How a lot will every companion contribute to get the business going? How long will they grow the enterprise until they entertain selling it? Is that it? … hardly.

Once the business gets going no doubt economic and business variables change which affect the business. Every partner’s perception of the course the enterprise ought to go changes as well. There are constant choices with reference to the combination of product and service offerings … the choice to get into another line of enterprise or get out of one. Should the main focus be on a higher quantity, decrease revenue margin business model or vice versa? What a couple of shift to a extra capital intensive model. If the business becomes a success, many instances potential buyers creep in, whether or not an angel investor or enterprise capitalist. Both companions must agree on the investment proposal.


What if one of many companions acquires an asset for the enterprise whether or not it’s land, a building, a small knowledge middle, a thousand servers, or to complicate issues further contributes an mental asset of some sort. When the corporate is going to be bought, what is the value of the accomplice’s contributed asset? Who is meant to value it? This can grow to be an insurmountable hurdle. Most buyers know not to value anybody piece close to what it’s price by itself.

When it’s time to promote the company, the monetary state of affairs of each accomplice has no doubt modified since the company was founded. The consideration for the company could be all money, all stock or a mix of money and stock. The tax implications of every of the three eventualities are completely different for each partner. I’ve seen the method of divesting a company go up in smoke too many instances as a result of the companions didn’t agree on the proposed deal. They spent years rising the business then completely disagree about when to sell, who to sell to, and/or how a lot to promote it for.

Business is about return on fairness, not “all for one and one for all”. My suggestion … one ship, one captain.

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