Before you partner or collaborate with another entrepreneur, read this!
Happy October from Montana! Posted some stunning landscape pics with the leaves changing colors at the end of this post, as well as a link to my Yellowstone pics from last weekend. Personally, I don’t do PSL and hate cold weather and fewer hours of daylight, but happy for all of y’all embracing the seasons. 😅 I’ll be fleeing to warmer temps next month.
Anyway, I was reading an article recently written by an entrepreneur who lost out on $50M in investment money, $30k of his own money, and 18 months of his life, all because he chose the wrong partners and didn’t protect himself legally…
Basically, he partnered with another business owner to start a company. His partner wanted to bring in another partner who ended up doing nothing, but they had him join as a third partner anyway. No Partnership Agreement detailing roles, responsibilities, profits, expenses, and most importantly in this situation-proper legal dissolution of the partnership.
Right after the business secured $50M in outside funding, he was forced out by the other two partners, who decided to dissolve the company and form a new company. He lost almost all equity, and was forced to sign a non-compete to even retain that.
Yikes 🙈🙈🙈🙈 Here are the lessons for you as well as my recs:
Partnering with another business owner
From a legal perspective, partnerships can be incredibly rewarding, and also, incredibly dicey if you haven’t gotten your legal ducks in a row 😬 In the U.S., if you form a partnership with someone and formalize that partnership, you’re personally liable for the debts of the partnership. That means creditors can come after your personal assets like car and house. There are ways around this with forming LLCs and limited partnerships, but regardless, the partnership relationship needs to be thoroughly thought through, mapped out, and legally encapsulated in a Partnership Agreement, i.e. a business prenup.
Partnership Agreements have to be done custom, so if you are interested in forming a partnership, you can read more about the process and investment of working with me 1:1 here, as well as book a call to get started.
Collaborating with another business owner
Did you know that if you and another business owner create something together-whether it be a group program, course, or some other project-you have joint copyright rights in the finished work, regardless of amount of contribution (and by contribution, I mean not just the amount of work either party did, but also, any expenses contributed). In other words, if you’re collaborating with another business owner to create a joint project, if you don’t have a legal agreement in place, they have equal rights in the joint project.
On the surface, this might not seem like a big deal, especially if you get along well and are excited to work together. However, joint rights means they have just as much legal right as you to say how your joint work should be marketed and sold, where it should be hosted, how long it should be sold for and whether it should be sold at all.
You need a Collaboration Agreement that outlines who will do what, including the allocation of profits, losses, and expenses, and what happens if there’s a disagreement between you two. My Collaboration Agreement template will help you map out all of the nuances of the joint project and the relationship. Not having this in place is the quickest way to sink a collaboration.
NOTE: A collaboration is different than having a guest appear in your program or course. In a collaboration, both parties are contributing to create a joint finished product. If you’re having a guest appear in your course or program, you’ll need a Guest Release in order to own the content they contribute, so you have the ability to resell, repackage, or repurpose that content however you like. Currently, I do all Guest Releases custom because they’re so varied. You can reach me via the Contact form or DM me on Instagram!