Sooner or later, it will become obvious you need help in growing your online business. The question every person faces in this situation is, “Should I take on a partner?” The answer depends on a number of factors.
I want to be absolutely clear upfront here that there is no absolute answer to this question. If you have a blog and Bill Gates wants to invest $500 million in it, I’m going to go out on a limb and suggest the partnership might be in your best interest. On the other hand, there are plenty of situations where the partnership makes little sense.
What benefits will you actually receive from forming the partnership? I find this simple question trumps people. If you are considering bringing in a partner, go ahead and list the benefits of doing so. Of those you list, go ahead and identify which ones the person coming in has actually accomplished versus merely promised you. You might be surprised at how short the list is.
I have to be honest. I don’t care for partnerships. A partnership is essentially a marriage. Getting into them is easy. Getting out is expensive and painful. While there can always be a certain fact situation that makes a partnership a good call, I personally shy away from them and go with alternatives.
A better alternative for most online businesses is to form an alliance agreement with the person being considered as a partner. In this form of agreement, the parties keep their business separate and simply agree to pursue a project together. The advantage of this approach is you get all the benefits of the partnership without the negatives.
In certain situations, it also makes sense to form a stand alone business entity for the pursuit of the project. Why? If the project involves a field or action where there is significant risk, the business entity can act as a shield between your already established business and the liabilities and debts created in the project. Confusing? An example can help:
Assume Bob owns a successful blog followed by hundreds of thousands of readers. John is a programmer. They want to develop a new project in which they use a very advanced site to teach marketing concepts to members who pay a monthly fee. This is a pretty standard business model online.
In forming the business, neither Bob nor John wants to expose their already successful businesses. To avoid this problem, they would form a new corporation or limited liability company owned by either themselves as individuals or their existing businesses. This new business entity creates a shield of protection.
Should you take on a partner for your online business or, to be clear, any business? While I am not a fan of partnerships, the decision is one that ultimately boils down to the specific situation. Even if a partnership seems to be the way to go, you may want to consider looking the alternative approaches looked at herein.
Richard A. Chapo, Esq.