If you are one of many people recently displaced by down-sizing and you need to start your own business to get your finances and career back on track, or the manager of a micro-business bogged down in administrative issues that stifle innovation and growth, you don’t need a list of the obstacles that prevent you from growing your business. You need a no-nonsense solution for how to make your business plan a success. And, unless you’re capable of doing everything yourself, you’ll need one or more partners.
Think of it this way: a general partnership is like a marriage. Once you sign on, you’re responsible, for better or for worse, for everything your partner does until you get a divorce. And ending a general partnership can be as difficult as a contested divorce.
What if you just want to go on an exciting vacation with that special someone? Would you think that you need to get married first? Probably not. The same is true for your business. To achieve innovation and growth in business, adopt a less is more mindset, and give your plan the power that comes from focus—without boat anchors.
A new business idea doesn’t need a complex business structure.
But a new business does need:
- A clearly written plan stating what will be done, who will do it and when it will be done;
- Adequate shared resources;
- Sound decision-making; and
- Effective marketing.
In legal terms, a joint venture is defined as a written agreement between two or more people or entities to share resources to do a specific project, for a defined period of time, with shared control.
Let’s say you just went through the frustrating ordeal of figuring out how to buy the right smart phone and equipment for you. You decide there’s a need for smart phone information and personalized phone holders. You might consider a joint venture agreement with a smart phone dealer who has an existing retail location and customer list.
You could draw up a simple agreement to test the market for a year, supported by the retail location to hold classes, create teaching tools and share revenue from the classes and resulting purchases of smart phones and your personalized holders, with partnership liability limited to this project. This joint venture agreement would reduce the likelihood of disagreements because you both have a clear understanding of the limitations of the partnership. Once the year-long test market is over, you and your joint venture partner can decide if the relationship should continue. There should be no ugly divorce that often occurs when a general partnership falls apart.
In the micro-business context, if you have a plan to expand your product or service line, you may want to negotiate a joint venture agreement with someone who has expertise you need instead of hiring an employee. The joint venture partner will share your goal and have a stake in the outcome, adding to the innovation energy and profit.
A joint venture agreement can avoid administrative obstacles to growth and provide protection from claims that can arise in the employer-employee context. Clearly, this is more fair and realistic than hiring someone as an independent contractor or part-time employee.
Having given you a sense of how a joint venture agreement might help you grow your business, I will follow my own advice that less is more and wish you the very best. If you have any questions or experiences with joint ventures, please share them in the comments below.
Peter Fulton, founding partner of Peter H. Fulton & Associates, has 30 years of experience in the trial of complex civil cases. A graduate of Boston University and Suffolk University Law School, he is admitted to practice in Massachusetts and Texas. He is a former Special Assistant Attorney General for the Commonwealth of Massachusetts and Training Specialist at Harvard Law School. He is also the resident legal expert at Micro Biz Weekly! If this article resonates with you, sign up for the email newsletter and join the revolution!