The rewards and risks of forming a partnership: millions of people co-own privately held companies, family businesses, and business partnerships, but establishing them—and keeping them together—is never easy. You might want to read this before you say "I do" to your next partner

Black Enterprise, July, 2005 by David Gage

From a psychological perspective, having a partner means having someone to share the emotional burdens of ownership. A partner can provide feelings of safety and reduced risk, a sense that "we're in this together." One of the biggest complaints of solo entrepreneurs is that no one understands the tremendous demands made upon them. Even spouses who try to be as empathetic as possible cannot truly understand all the complexities of starting and running a business if they're not part of it. For some people, the fears that have kept them from starting a business become manageable with a partner.

For other people, having partners is simply more fun than owning alone. If the only option were solo ownership, they wouldn't do it; the cost, in stress and worry, wouldn't be worth it. Being on equal footing with someone else in the business, someone you can't dominate and who can't dominate you, makes for a more stimulating relationship than yon can have with any employee.

THE PERILS OF PARTNERSHIPS

With so much riding on the success of a partnership--the partners' day-to-day happiness, security (often their mortgages), reputations, comfort in retirement, not to mention peace of mind--it's easy to see why partnerships are considered perilous. In a poll taken a few years ago, [entrepreneurs were asked] if they thought partnerships were a bad idea. Two-thirds of the respondents said they were. When asked why, the majority said they disliked co-ownership because of the partners' "inevitable conflicts" and "unmet expectations." A poll by researchers at the University of Minnesota uncovered similar misgivings inside family businesses. About half of the second-generation family members working at such companies had doubts about being there. The main source of their unease was, again, interpersonal conflicts. Failed business partnerships--and their attendant broken promises, financial ruin, and litigation nightmares--litter the business world and leave a deep impression.

Countless conversations with professional business advisers have convinced me that most of them are similarly against the idea of having partners. The reasons they offer are always the same: It's too difficult for partners to get along, partnerships are too hard to get out of, and when a partnership fails, the cost is enormous. (In private, some advisers jokingly admit that their own unhappy partner experiences have something to do with their skepticism.)

Of course, no one ever enters a partnership expecting serious conflicts. Advisers rightly point out that even when the probability of conflict is low, the risk may still be unacceptable if ... the cost of a failed partnership will be high.

THE COSTS OF FAILURE

People often jump blithely into partnerships because they are unaware of the costs of failure--and no wonder, since nobody contemplates failure when starting up. It may be difficult to assign hard numbers to these costs. Still, they can be enormous, and prospective partners should look at them carefully.