Making It Legal:

From the Department of Naches (Yiddish for “joy”) and Brag, I was interviewed by Forbes.com on one of my favorite subjects: business partners. How to choose them, what to look for and what to put in your business partnership agreement (or shareholders’ agreement or operating agreement–whatever the form of your business).

One of the tidbits I’m really glad made it into the article, “What to Look for in a Business Partner,” was the one stressing the importance of checking your partner’s credit history. It sounds “not nice” to ask such prying questions, doesn’t it? Here’s an ugly way the partnership can play out (I’ve seen it happen) if you don’t:

• Your company needs a bank loan. The bank checks the credit history of all owners (count on it). It refuses the loan because of your partner’s shaky credit history.
• You seek outside financing elsewhere. You can get it (e.g., credit lines) but your partner can’t (because of said credit history). To do so, you 1. mortgage the house or 2. provide a personal guaranty for the credit lines.
• The business needed more than your one credit line could provide, and now you’re both tapped. The business goes under. Guess who’s on the line to pay back the debt? Answer: It’s not your partner.
• Your partner is a slow (or no) payer when it comes to reimbursing her share of the debt. Does the bank or credit agency care? Answer: No. It’s your good credit that could be adversely affected if you don’t have the wherewithal to meet the monthly payments yourself.

Still think it’s “not nice” to ask about credit history?

A worldy-wise business guru once wrote:

A business partnership is about two things: partnership and business. Women entrepreneurs look to partnerships for the relationship benefits, not the monetary benefits. As a result, they don’t focus sufficiently on the business (money) considerations.

Smart or just cynical?
(A clue: I wrote it–see my blogpost featured on The Huffington Post).

Any time you accept money from someone else to help your business grow, you should put that relationship in writing. Many a lawsuit has been brought because of misunderstandings about (1) how much would be provided, (2) when the money would be provided, (3) whether there were benchmarks that needed to be achieved in order to receive more money, and (4) how and when the money needed to be repaid.

From Business Week online is this helpful post from Karen Klein on the subject. And make sure you bring in your attorney to wrap up the legal details.

Thanksgiving is a day of gratitude, an opportunity to be with family. So on this family day, it’s somewhat fitting to have this post about family businesses.

If you are, or have any inclination to be, in business with a family member, there is a secret to ensuring its success. Some firms have been family-owned for thousands of years. Others have turned into major corporations. What will yours turn into? A thriving dynasty? Or a cesspool of squabbling?

As reported in CNNMoney.com (thanks to Investors Business Daily), although family-owned businesses represent about 85 percent of companies in the U.S., only about 12 percent survive to the third generation. Looked at another way, 88 percent of 85 percent of companies in this country either go out of business altogether or fail to stay within the family. That’s a huge percentage.

So what’s the secret to getting along? Having a succession plan. Not such an exciting secret, perhaps, but fewer than 70 percent of all family-owned companies have one, according to the article. A succession plan brings up issues that families don’t like to discuss, sometimes because they raise uncomfortable truths. Uncle Harry can’t be trusted with the bank accounts. Sister Sally is an incompetent. Cousin Carrie couldn’t care less about being involved in the business but might resent her Brother Bob’s windfall because he’s a vice president. These issues make Thanksgiving dinner a potentially uncomfortable event … and many families would prefer to sweep contentiousness under the rug. As a result, nothing gets planned, Grandma Georgina (who founded the company) remains a control freak unable to part with having a say in the business, the employees become thoroughly disgusted with the lack of direction, and the company goes mechullah (bankrupt).

Remember, family business has two components: family and business. It may be good family relations to avoid succession planning issues, but it’s not good business.

I’m happy to share with you that I will be the guest expert on the Business Partnership Tele-Forum series on October 23, 2007 at 1pm (EDT).  And, surprise of surprises, I will be sharing my insights about business partnership agreements in my segment entitled “The Indispensable Partnership Agreement.�  J   If you’ve ever wondered: 

• What is the value of a partnership agreement?/Why should I bother?
• So what if I don’t have one?
• Awright, if I’m gonna do it, when’s the right time to create it?
• And what should it say, anyway?

then clear your calendar, hold your calls, and register now!  There will be time for your questions, too, so be sure to sign up for the Business Partnership Tele-Forum series today!

It ain’t easy.  And as the experts in my New York Enterprise Report article, “How to Choose a Business Partner� reveal, you may not want to go it alone. 

The same way you invite your gal-pals to have brunch with you and your sweetie (because, of course, you want to get their feedback to make sure you’re not making a terrible mistake with this person), so you want an objective eye looking at your potential business partner.  There are red flags, like divergences in communication style, or differences in values and vision – at first, you might be tempted to tolerate them, but in the end, they could act as a wedge between you.  Outside feedback – especially at the outset – is invaluable when you’re in a situation where your emotions might cloud clear thinking.

I’m excited to let you know about a FREE teleseminar that my company, Wise Counsel Press, is jointly offering on Thursday, August 2, 2007 at 1:00 p.m. EST (12:00 p.m. CST; 11:00 a.m. MST; 10:00 a.m. PST). And you’re invited!

• The four key traits that people should look for in a business partner
• Common behaviors or actions that are “crazy-makingâ€?
• How a written partnership agreement can ensure “smooth sailingâ€? for your company
• When it’s time to “shake up the mixâ€? by bringing on, or getting rid of, a business partner

And much, much more!The teleseminar will last for one hour, including time for Q&A - as I’m sure you’ll have a lot of questions! You’ll get lots of valuable insights, all for the cost of a long-distance call!  For more information and registrationfor the business partnership teleseminar, click on the link below (or copy and paste it into your browser):

www.WiseCounselPress.com/pship_teleclass.html

I’m eager to share my thoughts and ideas with you and look forward to having you on the call!  

. . . it probably is.   Don’t you remember your mother telling you, “Don’t buy a pig in a poke?� when you wanted to plunk down large sums of money for a major purchase without perusing Consumer Reports®?  She wanted you to be sure that that stereo (or car or refrigerator) was good quality, long-lasting, solidly-built, and from a reputable company.  It’s sound advice. 

Unfortunately, we often ignore that advice when we spot a mouth-watering business opportunity that promises phenomenal cash flow.  Whether we have our own businesses or are looking to invest in another’s, the potential for big bucks often acts like a “Greedy Switch,� turning off the light of Common Sense.  Images of big piles of money dance in our heads, as does all that the money can do for us:  amply provide for our families, secure our retirement, support important causes to better the world, help others in need.  We forget to check the Consumer Reports® and do the due diligence we should on the business and the partners involved.  And sometimes, at enormous personal cost to ourselves and our own companies. 

Here, as a cautionary tale, is the story of Marilyn Miglin, a Chicago-based cosmetics maven.  As the Chicago Tribune reported, Ms. Miglin invested $2.5 million to market a newly-invested needle that treated spider veins.  You would think that, having built up such a substantial enterprise that she could freely part with $2.5 million, she’d have done a little more checking into the background of her business partner, reputed con artist James Joseph Mellon.  But perhaps the deal seemed solid.  After all, Miglin was in the beauty industry.  And, presumably, she had tried out this product.  The details of the story are sketchy as to why she was facing a $16.8 million judgment against her.  But the end result is that after all her years of hard work and entrepreneurship, she was forced to declare personal bankruptcy at age 68.   

“I believed so strongly in the promise of this needle to help both women and men, I followed my heart instead of the advice of my family and my advisors,” said Miglin. “That was my mistake.”