In the previous article we talked about the options that you have when it comes to sharing parts of your company with others and we explored some questions which could help you make a decision.

In this article we go in more depth and explore the key aspects which you need to consider if you decide to run your business together with other entrepreneurs.

Running a business together

If you chose to run the company in joint ownership, there are multiple company types you can choose from. Depending on country forms may vary, here are some examples from my Swedish context. Check out specifically what is true in the country where you are planning your company.

Limited companies are the most common. The ownership is distributed through a proportion of shares to each owner. Owners then assign a board (out of themselves or by adding externals) and this board assigns CEO who takes in employees (among owners and/or external). The company’s management system and the roles each owner has, are decided through decisons in the board of the company and when you distribute the tasks.
An economic association is another form that is growing rapidly in popularity in Sweden today. The economic association is formed by three or more people. What you should keep in mind when considering this type of organization is that it is an open form. The statutes you write set the framework for who may be a partner. Therefore, everyone who then meets these criteria has the right to request to become part of the economic association.
The implication of this is that economic associations are very common for organizations such as cooperative preschools where membership is naturally linked to having children in that preschool. But staff cooperatives of various kinds are also emerging. In these cases, a group of people working together often share premises and other costs associated with that.
The trading company is another alternative you could choose. However, since limited companies in Sweden today are so simplified in their administration and require relatively little effort, trading companies are very rare here today. The great personal risks are seldom defensible if you are not already married and have shared finances.
And so there is the unusual form of “simple company”. It is really only sole proprietors who for a joint venture obtain a joint VAT return number the form is not its’ own legal entity and quite unusual.

You need a good plan if you want to ace your partnership

A good basis for successfully running a company together with other entrepreneurs is to spend plenty of time on the partnership agreement when starting your collaboration. In the partnership agreement, you write down how the responsibility is distributed among you, how profits and losses should be distributed, who does what, and how you should handle different situations which may arise.

Here are some questions which you might be useful to consider:

What do you do if you do not agree with your business partner(s)?
What do you do if someone wants to quit the partnership?
What if your company get into tough times, what do you do? Are there limits to your risktaking?
What do you do if someone becomes ill or for other reasons unable to run the company?

If any of these scenarios were to happen, you can fall back on the partnership agreement for answers and guidance.

The very process of writing the agreement can reveal points in which you think alike or differently from your business partners. This in itself will be a valuable lesson and experience. The key here is to think about as many scenarios as possible and have constructive conversations and agree on ways of managing them. This will make your joint-entrepreneurship journey smoother.

More things to consider

Here are a few more questions you might find useful to ask yourself before you enter into a joint venture:

How equal are you in your collaboration?
Do you agree on how much you are willing to invest in terms of time, money and energy? If not - how do you compensate for the differences?

A situation where one partner is full of energy and drive while the other wants or needs to prioritize other things in their life can wear off the partnership, making it more likely to break in the future. It is therefore important to make each of the partners’ expectations and wishes clear from the very beginning. Then you need to negotiate sharing the responsibilities, as well as the compensations to make sure that everyone receives their deserved share.

External resources

Lastly, consider if and when you want to use external resources. For example, in Sweden, newly started companies are offered by the NyföretagarCentrum a mentor program where a mentor brings in an objective, outsider’s perspective which can bring a lot of new and valuable feedback to help you find your way forward. This is a great resource for new entrepreneurs.

For established companies, an external board member can be a good way to get a new perspective, more clarity and sharpen the priorities around the entrepreneurship collaboration.

Join us in the next episode where we take a deeper dive into a different scenario: sharing your work life (but not ownership) with others.