Ladies Who Launch

by Sharon Stenger and Laura Racanelli

You’re thinking of starting a business. Should you have a partner? If so, how do you ensure that the partnership and business are both a success? Based on our own experience building a strong partnership, here are some tips to help you as you get into launching mode …

Fundamentals to Ensure Success

1. Build a strong foundation.

-We met at college over 20 years ago. We were sorority sisters, Sharon introduced Laura to her husband, and we helped each other through the devastation of miscarriage.
-We have similar values.
-We really know each other—both our strengths and weaknesses.
-We value what the other brings to the partnership.
-There’s mutual respect and trust.
-We have fun together.

2. Have mutual goals. Ours manifested in two ways:

-The motto of Rensselaer, our Alma Mater, is “Why not change the world?” We both had taken that to heart, and discussed during play dates, 1) are we doing what we are supposed to be doing, 2) how will we make the world a better place, and 3) isn’t there something we could work on together?
-We wanted to create a business that would fit into our lives. We needed a business that we could work on in the evening, on weekends, and during our kids’ play dates.

3. Ensure spouses (or anyone else who would be important) are on board with the idea. Because this business would take family resources (i.e. time, dollars) we had a family dinner. After dinner the kids played and the parents discussed the business opportunity and plan. We wanted to make sure we had support—both emotionally and financially—from our families.

4. Become strong communicators. Really listen to each other, and say what you mean.

Some Benefits of Working With a Great Partner

1. It’s fun to work on something you believe in with someone you like to be around.
2. It’s exciting to share the “highs,” and there is someone to encourage you during the setbacks.
3. We set goals together—weekly, annually, and long-term—and hold each other to them.
4. We play to each other’s strengths (we lead areas we like, and we share the “drudge”).

The Legal Side of Partnerships: The Operating Agreement

1. Why you need an operating agreement:

-Communication, management of expectations, protection, and your bank will likely require it.
-As in a marriage, it’s important for you and your partner to discuss and agree on key issues.
-Because everyone believes and hopes they will be successful, friends will stay friends, and there will be no issue. Well, life sometimes doesn’t work out as we hope. You and your partner need to protect yourselves in case something changes: divorce, death, someone wants to retire (successfully), someone wants to end the partnership, etc.

2. What is included in an operating agreement?

-Company name and type of company: LLC, partnership, C or S corp.
-Area where the business will engage.
-Capital contributions from the members (i.e. 50/50 or other arrangement).
-A clause saying that the members shall not be bound by, or personally liable for, the expenses, liabilities, or obligations of the company, except as otherwise provided by a separate written agreement.
-A clause saying that no member should have priority over any other member with respect to a capital contribution, or distributions or allocation of income, gain, losses, deductions, credits, or items.
-How the profits and losses of the company as well as income, deductions, or credit should be allocated, for company book purposes and for tax purposes.
-Who will manage the business of the company?
-Who will make the decisions concerning the operation and management of the company?
-Actions the members should not take unless each partner has consented.
-Class of membership and voting rights.
-How members can withdraw from the company.
-Withdrawal obligations and liabilities; and other members’ ability to exercise their right to purchase the withdrawing member’s interest.
-Provisions if there is a divorce or death.
-Determination of fair market value.
-How to dissolve the company.
-For us, since this business was based on our friendship and we wanted to maintain that over any business, we created this paragraph in our agreement: “Each Member enters into this agreement knowing that our friendship brought us here. In the course of business, that friendship will remain in the forefront of our actions. In the event of a disagreement, the Members agree to discuss and work things out—as we would instruct our children on the playground.”

3. Making operating agreements easy:

-There are operating agreements available on the Web. Any simple search will provide a number of examples. Review them, and choose what’s right for your situation.
-Have an attorney review the agreement.
-Keep copies of the document in your company files, with an attorney, and with your financial institution.
-Don’t procrastinate: Put together your operating agreement at the very beginning of your partnership.

Sharon Stenger and Laura Racanelli are members of the Westport, CT, Incubator and co-founders of www.OurHopePlace.com, which helps women cope, hope, and heal after miscarriage.