What Should Business Partners Discuss Before Starting a Company?

Why It Matters

Business partnerships often begin with a shared vision and mutual trust, but that alignment doesn't always extend to specifics like who makes final decisions, how profits are split, or what happens if one partner wants out. Skipping these conversations doesn't make the underlying questions disappear — it generally just delays them until they surface under pressure.

Key Elements

While every partnership is unique, certain topics tend to be worth discussing early and documenting in writing.

• Ownership percentages and the basis for how they were determined
• Roles, responsibilities, and expected time commitment
• Initial and future financial contributions
• How major decisions will be made and what requires unanimous consent
• Compensation, salary, and profit distribution
• Buyout or exit terms if a partner leaves, becomes incapacitated, or passes away
• Dispute resolution process if partners disagree

How It Works

Many partners find it useful to have an open conversation about expectations before any legal documents are drafted, since the discussion itself can reveal misalignment that's easier to address before money and time have been invested. Once expectations are aligned, those terms are typically documented in a partnership agreement, operating agreement, or shareholder agreement, depending on the business's legal structure.

These agreements generally serve two purposes: they clarify expectations while relationships are still positive, and they provide a reference point if a disagreement arises later. Partners sometimes revisit and update these agreements as the business grows or circumstances change.

A Business Example

As an illustrative example, three friends might start a business assuming equal effort and equal ownership, but within a year one partner reduces their involvement due to a full-time job elsewhere. Without a prior discussion about how reduced involvement affects ownership or compensation, this situation can create resentment and conflict. This is a hypothetical example for illustration only.

Common Pitfalls

Partners sometimes avoid difficult conversations about money or control because they don't want early friction, but this avoidance often creates larger problems later. Other common issues include failing to address what happens if a partner wants to leave, and assuming that a good personal relationship will substitute for a written agreement. General education on these topics is not a substitute for individualized legal or financial advice.