Are you looking to form a new partnership? Here’s a checklist of items you need to consider before saying “I do.”

Introduction

Hi, I’m Morgan Davis, a cannabis attorney based in Raleigh, North Carolina. Let’s talk about how to keep your business protected and thriving.

As spring arrives and nature buzzes with activity, many businesses start forming partnerships. Just as animals come together during this season, businesses often find this an opportune time to partner up. If you’ve followed Davis Legal for a while, you know I liken partnerships to marriages. Initially, everything is rosy and exciting, but over time, the reality of working together sets in, revealing both strengths and annoyances. Much like marriages, business partnerships require a solid foundation to succeed.

The Checklist

Here’s a detailed checklist to help ensure your partnership starts on the right foot and continues to thrive.

1. Define the Why

• Purpose: Why do you want this partnership? Why is it beneficial for you and your potential partner?
• Expectations: What are your hopes and dreams for the partnership? Do they align with your partner’s?

Spend several days, if not weeks, discussing both business and personal visions with your potential partners to ensure alignment.

2. Mission, Vision, Values, and Goals

• Alignment: Ensure you and your partner share the same mission, vision, values, and goals.
• Communication: Establish how well you can work together, dream together, strategize together, and communicate.

If you’re concerned about sharing your ideas, consider using a Non-Disclosure Agreement (NDA) or a joint venture agreement.

3. Look Under Their Hood

• Financial Health: Review the business’s financials, including P&Ls and taxes.
• Current Responsibilities: Understand their existing obligations and ensure they have the bandwidth for your joint venture.
• Business Operations: Talk to their employees, customers, other business partners, accountants, and lawyers.

If merging companies, review all corporate governance documents, major contracts, and existing liabilities.

4. Money Matters

• Funding Sources: Where is the money coming from and how will it be used?
• Financial Responsibilities: Determine who is responsible for what and how profits and losses will be divided.

Discuss money openly and constructively from day one to avoid future conflicts.

5. Partnership Agreements

• Operating Agreement: Draft an operating agreement outlining roles, responsibilities, fiduciary duties, and exit strategies.
• Documentation: Ensure all agreements, including financial arrangements and operational expectations, are in writing.

Without a formal agreement, you risk facing legal and financial difficulties if the partnership dissolves.

Conclusion

Conduct a thorough due diligence process before entering a business partnership to avoid potential pitfalls and ensure long-term success. Whether you do this on your own, with me, or with another professional, make sure you’re well-prepared.

If you need assistance drafting agreements or conducting due diligence, don’t hesitate to reach out.