by Ronnie Dauber

Created on: March 28, 2008

There are business rules to follow that will mark a successful future for a three-person business.

To begin: You need to separate your relationship from that of friendship to that of business partner. You must agree that within the confines of the business venture you will not acknowledge each other as friends but rather respect each other as partners in business together for the sake of the business.

Why? So that there is no respect of persons, profits or responsibilities, and so that all things remain equal.

First Meeting: You need to have an official meeting to start the process. One of you should record it, either electronically or by notes and transcript. Give a hard copy of the transcribed minutes recorded to each partner.

Your first point of order should be that all three of you agree to prioritize a specific weekly or bi-weekly time for continued meetings to discuss business progress and ideas. This is crucial.

Business Mandate: Outline your entire business: goal; service or product; plausible market; marketing strategies; production process; financial, economical and political projections; location; rate of expansion; employment times; holidays and vacations; charitable contributions; investments; HR responsibilities for each department; rate of pay for each partner and employee; and reinvestment back into the business.

Type these out clearly and give a copy to each partner to review.

Now, you need to discuss precisely what part(s) of the business each partner will be responsible for and have the authority to rule over. Work it out on paper and type the results out clearly, with a copy going to each partner.

When all the aspects of the business have been decided, you need to draw up a legal contract for each of you in relation to the business, along with the business statement (or mandate), and have them presented to a lawyer for legal consideration and certification. All three of you will sign these before the lawyer and your positions will become official.

The lawyer will help you to register the business and determine its management structure including any director's board, and appoint your positions within that accordingly.

Why do this? Because many times friends go into business together with good plans and intentions but circumstances and unforeseen factors, including abundance or shortage of finances and disagreements, can cause the parties to manipulate or take undue authority over aspects of the entity, which could effect the growth or potential of the business.

It protects each party in case there are differences that arise giving way for one party to assume they can over rule another.

As well, should one party decide to leave, the business will remain strong and not weakened from structure failure. The business will need to find a replacement officer but it will continue to prosper. And, the separating party cannot absorb any of the business, its profits or market because once they leave the business, they have no rights to it.

Should it be necessary to close the business, each partner will receive equal portions of profit and/or legal obligations.

When a new business is planned, presented, and acknowledged on a professional and legal basis, the partners can each know what their responsibilities, authorities and obligations are. This helps protect the business against the possibility of partner insubordination, misappropriation of funds or products and non-commitment from a disillusioned partner.

When everyone has a clear understanding of their role and responsibilities the business has a better potential to succeed.

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