should i partner in a small business?
Friday, July 23rd, 2010 at
2:50 pm
I have an opportunity to buy into a partnership with a small business. What kind of research/info do I need to get to find out if this would be a sound financial investment, or are there any type of professionals that could help me answer this question as I have no business experience/background.
Tagged with: Business • partner • Should • small
Filed under: Small Business Opportunity
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You should consult a professional that can assist you with something of that nature. Look at the existing businesses financial plan, tax returns for the past two years, profit and loss and the partners credit (do you want to partner with someone that has bad credit or outstanding debts?) also, see if they have a Dunn & Bradstreet rating.
Find a small business CPA and a business lawyer, you’re going to need both.
The CPA will tell you why this ‘opportunity’ was offered to you with no business experience or background. Are you ‘buying’ a lame cow? The CPA can tell you if this ‘cow’ is lame or dying.
The lawyer will draw up a partnership agreement to protect you in case your partner decides to ‘get cute’ in the arrangement. You want to cover your personal liability if the ‘opportunity’ becomes less one of business and more one of ‘jail time’.
Take your time and find both these people to walk you through what you need to know before you sign anything.
I would definitely contact the professionals recommended by the other responders. I would want to see the credit scores of the current partners. I would treat it as though it was someone (some company) that I was giving a loan to. And trust me, don’t ever believe someone’s statement about their wealth….always ask for proof.
I would also want to know and actually speak with the partner that you’re buying out to find out why they are leaving the venture.
It’s been my experience in the banking arena that small business partnerships don’t tend to work out. Make sure you have a very tight partnership agreement, don’t do anything on a hand-shake, remember its strictly business, don’t involve friends or family, and keep the bookkeeping on the up-and-up at all times.
Good luck!