Starting a Business With Multiple Owners (25 Top Ways & Tips)

Starting a business with multiple owners is not as hard as some may think.

Reading this article will give you very powerful insights and tips to successfully starting a business even if you have multiple partners.

 

Why Start a Business With Multiple Owners?

There are many sayings as it relates to the number of individuals all trying to direct operations or provide leadership when it comes to particular scenarios.

One of those sayings is too many cooks in the kitchen which can be disastrous as it relates to the preparation of food because different cooks have different ways of preparing food and utilizing different ingredients in different amounts.

As it relates to relationships, a great way of capturing the potential difficulty can be expressed with the saying that two is company and three is a crowd.

In the business world there can be difficulty if there are multiple owners in which each have a voice and have a different way of thinking and wanting to manage the business.

However, as with all things, these multiple individuals and potential points of friction can be worked through as long as everyone is clear about their role and responsibility and stay within those boundaries.

Let us therefore take a look at starting a business that has not just one or two owners but multiple owners and how that needs to play out.

 

25 Best Ways & Tips to Help with Starting Business With Multiple Owners or Partners

 

1. Research

As with any other business, regardless of whether there is a single or multiple owners, it is important that the research be done as it relates to starting the business.

The research that the partners should conduct when starting a business would be to analyze the market and the viability of the product or service that will be offered.

Also, an analysis of the competition of other individual companies, with in the business sector, should be conducted, analyzing your company’s strengths, and the opportunities that are presented.

 

2. Budget

In most relationships, personal or professional, a major hazard that can sometimes present itself is in the area of money.

Therefore, when considering starting a business with multiple owners it is important that everyone is on the same page with that page being the budget.

The commitment of each of the owners may be to each have a certain percentage of money that they are in investing in the business and possibly selecting one individual to manage the finances with the other owners providing accountability.

The pitfall that needs to be stayed away from is second-guessing the expenses and possible lack of income and having a tendency to blame others for the financial shortcomings.

 

3. Competition

Another analysis that should be done is to evaluate the competition.

This can be accomplished by looking at your competitor’s website, their marketing and advertising strategies that they are involved with, looking at the Internet for customer reviews of your competitor services, etc.

By knowing your competition, you can possibly create an “edge” that will distinguish your company from the competition by providing an extra dimension of service to the customer.

 

4. Business Plan

An important document that needs to be mapped out is the business plan for the enterprise.

With multiple owners a good suggestion would be that everyone has input to the plan and can be based on their particular strengths or area of expertise as it relates to what is required in the business plan.

A business plan is a roadmap for the business to follow in order to be successful in providing the product or service to the customers.

Some of the elements of a business plan include:

• Executive summary
• Budget
• Marketing strategy
• Market analysis
• Staffing
• SWOT Analysis (Strength, Weakness, Opportunities, Threats)

 

5. LLC

When it comes to organizing your company there are a variety of legal structures that the company can be formed under.

Some of those legal structures can include:

• Limited Liability Company
• Limited partnership
• General partnership
• Limited liability partnership
• LLC partnership

There are advantages and disadvantages to each of these legally formed models and it is best to do your investigation to find out what is the most beneficial to all involved.

You could also talk with a lawyer who could explain the pros and cons, what to expect, and possibly suggest the partnership that would be most beneficial.

 

6. Complimentary Skills

One of the better tips in forming a company with multiple owners is to utilize individuals that have complementary skills.

For example, if one partner has a quality sales ability while another one is good at finances and possibly another potential partner having significant experience and success in marketing these would be good complementary skills for these partners to join together in running a business.

The opposite would be true and could present problems if one or more have the same skills and endeavor to utilize those skills and possibly cause conflict with others.

 

7. Clearly Define Roles

Before signing on the line and entering into the partnership to start a business it is important that everyone is clear, understands, and accepts their particular role that they will play in the business.

These “lanes” need to be clearly defined and put in writing so that if there are any conflicts or issues that arise in the future that documentation can be referred to and partners can be reminded as to what was agreed upon.

 

8. Shared Values

Another important consideration when starting a business with multiple owners is to make sure that there are shared values amongst each of the partners.

For example, if one partner has the laser focus of only earning money while another partner may also want the business to realize a profit but also be involved in serving people this may prove to be a conflict if it comes to the point where decisions need to be made as to whether the focus of the business will be strictly money or other issues.

 

9. Have Experience

Another important consideration when starting a business with multiple partners is the experience factor.

If one individual in the partnership is inexperienced while the others may be more seasoned and experienced in business operations, there may be a tendency to overpower that one individual based on their inexperience.

Therefore, there needs to be understanding in starting the business with multiple partners that if this becomes a reality everyone needs to step back, and remember that each of the partners, based on what was captured in writing, all have an equal say so regardless of their experience or lack of.

 

10. Writing

The other critical component in starting a business with multiple owners is to capture everything in writing.

Specifically, everything that is agreed to as it relates to each of the partners involved in the operation should be captured in a narrative and presented to each individual with that narrative becoming a point of reference if there are any issues.

If there are issues and the agreement needs to be amended that can occur but only with the consent of all involved.

 

Mistakes to Avoid

 

11. Forming Wrong Company Entity

When starting a business with multiple partners there are a few mistakes to avoid.

One of the critical and most profound mistakes to avoid is to form the company under the wrong legal structure.

The reality is that if you choose the wrong entity, it can have significant tax implication as well as other legal consequences.

To ensure that you form the appropriate entity it is good to get both legal and tax advice to make sure that the choice of the partners, as it relates to their legal model chose, is the most beneficial to all concerned.

 

12. Failing to Grow

Similar to bringing a child into this world and then neglecting that child can be the same mistake that partners can make in forming a multiple partner business.

This means that once the company has been formed legally it is important to make sure that each of the partners understands their duty to comply and operate the business within the legal parameters of their selected legal model.

 

13. Not In Writing

Another mistake that multiple partners make in creating a business is not capturing everything in writing.

When you start out, enthusiasm is high, and no one thinks that the venture will go sour or not be viable.

The reality is that life happens and so there needs to be in place a written strategy so that if this worst-case scenario happens everybody knows what their rights and expectations are for themselves and the other partners.

 

14. Contributions 

If all of the partners do not contribute to the success of the company with their financial support this may become an issue. 

The reality is that some partners may contribute cash, while others equipment, while others may provide a contribution of a combination of these items.

Also, there needs to be an understanding that when a partner invests in the company what their intent of that investment is.

In other words, was it a capital contribution that was to be under the control of the company until such time that the company dissolved or was the expectation of the partner, as it relates to money and equipment, that the money presented, or the equipment given was a loan to be repaid.

 

15. No Majority

When partnering with others in the creation of a business, the full definition of partnership is that everyone is on an equal level.

Simple math will dictate that if there are four partners and a critical vote needs be taken and there is no majority then what takes place to break the deadlock?

There needs to be a provision written into the agreement that anticipates this reality and possibly a non-partner gets to decide by voting to break the deadlock.

• Tips for Starting a Business as a Makeup Artist
• Best Tips for Starting a Bus Tour Business

 

16. Lack of Planning

On the opposite side of the coin there may not be a plan in place when the company realizes significant success.

The friction may occur when the revenue starts being deposited into the bank account and there’s no clear understanding or plan in place as to what the money should be utilized for.

In addition, there may be a partner who feels that they have contributed more in time and energy to the success of the operation and may feel that they deserve a greater percentage of the money that is being realized.

A plan to address this contingency should be in place.

 

17. Expectations

As it relates to the success of the business each of the partners comes with a skill set which is essential to the business’ success.

The reality is that if an individual has the skill set of sales and has knocked the marketing and sales ball out of the park then their work and expertise should receive a higher compensation than those partners who may have not been as instrumental.

Therefore, these expectations and scenarios should be anticipated and there should be an agreement amongst the partners that such a scenario would require that the sales individual receive a higher compensation package or bonus.

 

18. Majority/Minority

If the structure of the agreement amongst the multiple partners is that one individual may have majority voting rights this may be an agreed-upon aspect of the contractual arrangement.

However, this doesn’t mean that they can do whatever they want to the detriment of the other partners.

The assumption is that being partners presents an obligation that each of the partners should adhere to both the majority and minority interest partners and abide by certain rights as agreed upon and applicable in the contract.

 

19. Hire Professionals

Another significant mistake that new businesses make that have multiple partners is their hesitancy to hire professionals to steer the company in the right direction to begin with rather than doing it themselves or using non-professionals and then making matters worse.

The commitment of the partners should be to get it right the first time and utilize the resources of professionals despite the costs that when not used may cost the company more in the long run.

 

20. Trust

An important basic foundation of the partners in starting a business should be trust.

Not adhering to the trust factor, as it relates to the job or involvement of the partners, can run the company a foul of the law as certain states require that all owners know what each of the partners in the organization are doing.

In other words, you cannot be the Lone Ranger or else you could be held liable for the actions of each of the partners.

 

21. Worse Case Scenario

The worst-case scenario for a business enterprise that you have started with multiple partners is the unexpected death of one of the partners.

Often this reality is not anticipated or planned for and if there is no provision in place your business can cease to operate.

This is because under some state laws even though the business partner is ill or has passed away, they still have rights under the law and as it relates or pertains to all contracts.

In addition, if the partner dies there may be potential issues as it relates to the family members who survive the partner.

This worst-case scenario should be anticipated and a process should be in place that will be engaged if in fact this happens.

 

22. Non-Disclosure Agreements

Another important factor when starting a business with multiple partners is the issue of non-disclosure agreements.

These non-disclosure contracts or agreements can restrict certain things from being disclosed that revolve around certain information, competition, or placing the company in a bad light.

To make sure that these contracts are binding it is important to engage a lawyer that can draft a contract that will be iron-clad.

 

23. Understanding Business Law

When starting a new business with a group of partners it is also important that you have a moderate to good understanding of the laws associated with your business.

This simply means that fi a decision is made to move the company from one state to another it is important that the business adapts to the laws of that new state to be compliant.

 

24. Intellectual Property

Intellectual property within any business is deemed an asset.

With your new business that you have formed with your partners it is important that all individuals understand that intellectual property belongs to the company because the development of that asset was, most likely, manufactured or developed by the individual while working for the business.

 

25. Litigation

One final tip or word of advice for starting a company with multiple partners is to make sure that all contracts and agreements are signed and witnessed as well as being properly executed legally.

Often, if there is dissension or disagreement then many individuals will choose to take the other person to court and litigation can be not only time consuming and stressful but expensive as well.

 

Personal Story

When I worked for a not-for-profit one of my favorite bosses or the executive director was an older gentleman who was within a couple years of retirement but certainly had a way with words and extensive sayings that were pithy and witty.

For example, he would often say “where there is a will there is a relative” or he would say “I always follow the Golden rule; the golden rule being he who has the gold rules.”

One of the other leadership sayings that he would always remind us about when it came to our job description and roles and responsibilities was that we should stay in our lane.

He would always remind us of this reality if we tried to move outside of our job description and interact or sometimes interfere with another person’s job or in the performance of their job.

 

Starting a Business with Multiple Owners FAQs

 

What is the Popular or Most Beneficial Reason for Starting a Company With Multiple Partners?

The best reason for starting a business with multiple partners is having someone to share the start-up workload.

 

What is the Greatest Pitfall for Starting a Company With Multiple Partners?

According to Entrepreneur the greatest pitfalls to destroy partnership agreements include:

• Sharing capital instead of expenses
• Partnering with someone because you can’t afford to hire that profession
• Lacking a written agreement

 

You Can Do It

Going into business with multiple partners has a significant number of benefits.

However, when you add into the mix different personalities and the goal of the business earning money things can get difficult.

Therefore, it is important to capture everything in writing and everyone understanding their role, so that a multiple partner business venture can be successful.

 

Conclusion

There is strength in numbers, and this holds true in the business world as well.

When a group of business leaders get together and decide to formulate a new company with each of these leaders being partners this can be a dynamic entrepreneurial business model that can be extremely successful.

It is just important to capture everything in writing, be cognizant of each partner’s importance and encourage everyone to stay in their lane.