When considering a business partner, asking the right questions is crucial. These questions help you know if you’re aligned with your vision, day-to-day operations, and everything in between. Some of these questions might seem basic, but the key is to leave no stone unturned. The most basic disagreements may threaten to ruin the business.
Questions to Ask Potential Small Business Partners
Why do you want to start (or join) this business?
Understand their motivations and gauge their commitment to the business’s success. Get to know their views on entrepreneurship and business, in general. Someone who views business as a means to make money will bring a different perspective than someone who has a mission to fulfill.
What are your short-term and long-term goals for the business?
Align goals — and timelines — to keep partners on the same page, focused and motivated. Speaking of the future …
How do you envision the partnership's growth and future direction?
Successful partners require aligned long-term visions and goals. Knowing how each partner views the longer term allows you to efficiently plan for it. For instance, if applicable, are there plans to expand geographically? Know how each partner views research & development. Is there ever a point when one partner might want to leave because the company’s grown too big?
What are your expectations regarding roles and responsibilities?
Clarify expectations early on to prevent misunderstandings and conflicts down the line. Get as specific as possible. Talk through all business activities, from leadership roles to administrative considerations. For instance, who is the main representative when it comes to tax considerations? Can both parties:
- Make tax elections on behalf of the LLC
- File tax returns
- Represent the LLC in foreign, state, and local audits and judicial proceedings
How does each view the decision-making process?
What are the matters on which each partner can vote? Will both parties need to agree on something in order for the change to occur? Know what kind of activities each partner is willing to try even though they are reluctant.
What relevant experience, skills, and resources do you bring to the partnership?
Assess a potential partner's strengths and weaknesses. Look for ways they complement each other as well as growth opportunities.
How much time and capital are you willing to invest in the business? What are your ownership exceptions?
Ensure that partners are on the same page regarding time and financial commitments. A follow-up question is to talk through whether a partner is willing to personally guarantee any LLC obligations. Be specific and clear. Will there be majority and minority interests or is it an even 50/50 LLC? Get a feel for whether a partner is open to bringing on more partners.
What is your risk tolerance? Do you have a preferred exit strategy?
Everyone approaches risk differently. Knowing these preferences now will go a long way in reducing conflicts later. The same is true for an exit strategy. You want to plan as much as possible for every scenario.
How will we handle conflicts and disagreements?
Disagreements will come up. Discuss conflict resolution strategies upfront to focus on preventing minor issues from escalating. This is also why proactively defining the decision-making process is crucial. For instance, perhaps one partner gets the final say in decisions regarding the company’s operations, while the other partner makes the marketing decisions.
What are your professional values, and how do they align with the business? What are your personal values?
Shared values and ethics are vital. You want to determine your non-negotiables before this discussion, so you know what is a deal-breaker.
What is your leadership style?
There are many different types of leadership styles. Leadership approaches help determine if they’re compatible with other leaders and team members. Is respect important to them, regardless of the employee’s level? Ask about specific instances where they had an opportunity to rally their team. How they treat underperforming employees is also important to discuss.
How do you balance your personal and professional life?
Discussing work-life balance can prevent burnout and ensure long-term sustainability. Even talking through where life is now and where it might take you can be helpful. If a partner, for example, has dreams of traveling the world, talk about how that might affect their business activities.
What is an Operating Agreement?
Everything you and your partner discussed should be documented. Most states do not require operating agreements for LLCs.If you want to ensure all members of your LLC know and understand their roles and responsibilities in the business, however, it’s best to create one.
An operating agreement is a legal document outlining how decisions are made within the LLC. It also addresses business financials, members' roles, regulations, and rules for the business. This document ensures the business is being properly run to fulfill specific wishes of the business owner(s). We create an operating agreement for you when you start your business.
