Get Your Internal Structure In Order Before Looking Outward
Whether you are an 18-year old student with a brilliant idea for a new piece of technology or an established businessperson looking to start his or her next project, the first place to begin is within. Change is a fact of life, especially in relationships. And business relationships are no different. Goals change. Expectations change. Situations change. So it is vitally important to manage your expectations and the expectations of your co-owners or co-developers as early as possible. That way, if your relationship does change and, for example, you and your fellow co-owner have a falling out, you have taken the appropriate steps to give the business a chance to survive.
If you are just getting started, that means talking with your co-developers and making sure you are on the same page with ownership allocations, development plans, growth and sales projections, etc. Then get these items in writing. The more structure you can put in writing, the better off you will be. Discuss the big things, like:
- Whose idea was it?
- How much has each person contributed to development and implementation?
- Who is to own what? What type of formal business entity are you going to form?
- Who owns the intellectual property?
A great way to handle these items is to form a legal business entity. Try to agree on these key issues in the internal agreement structure between you and your co-owners. If you form an LLC, adopt a comprehensive and carefully planned operating agreement. Deal with the buy-sell concerns. Address the IP matters. And so on. Then, you and the co-owners can look to the internal governance documentation and contractual arrangements as guides, deterrents to conflict, and potentials for resolution in the event of irreconcilable conflict.
Whether you form a limited liability company, a corporation, or go another route, planning is the name of the game. Regardless of the road you take, managing expectations early is key to the future success of your business.