Taking a Partner Can Help . . . Or Hinder

By Nina Kaufman, Esq.

Sometimes, it seems, you do have to look a gift horse in the mouth. As Sarah Needleman points out in her Wall Street Journal article, “Taking a Partner Can Help… or Hinder,” a promise of cash can lead to problems of control.

When half of all businesses that try to borrow money don’t get any or all of what they need, entrepreneurs are turning to investors to provide a needed lifeline. However, investors often want more than just a return on their money. They may demand control, or a strong voice in the business. Even if they don’t have the temperament or the skill sets (above and beyond a fat wallet) that the company needs. Entrepreneurs will enter into these shotgun arrangements, often because they’re desperate for cash.

How to avoid the dissention? Well, one way is with solid financial planning. Filing a patent application or needing to stock up on inventory are not business transactions that should come as any surprise. If your cash reserves aren’t falling short, you won’t need a quickie cash infusion and can avoid being held hostage by an investor’s demands. And, you’ll be able to take your time to find an investor who’s really the right fit for your company.

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