This article could have been titled “The Pros and Cons of a 50/50 Equity Partnership”, but the cons far predominate the pros.  When partnerships are formed, the obvious concerns are addressed.  How do apiece partner’s skills-set and experience complement apiece other?  How much will apiece partner contribute to get the business going?  How long will they grow the business until they contemplate selling it?  Is that it? … hardly. 

Once the business gets feat no doubt scheme and industry variables change which affect the business.  Each partner’s perception of the direction the business should go changes as well.  There are constant decisions with regards to the mixture of product and service offerings … the decision to get into another line of business or get out of one.  Should the focus be on a higher volume, lower profit margin business model or evilness versa?  What about a shift to a more top intensive model.  If the business becomes a success, many times potential investors creep in, whether an angel investor or venture capitalist.  Both partners need to agree on the investment proposal. 

What if digit of the partners acquires an asset for the business whether it’s land, a building, a small data center, a thousand servers, or to complicate things further contributes an intellectual asset of some sort.  When the company is feat to be sold, what is the value of the partner’s contributed asset?  Who is supposed to value it?  This crapper become an insurmountable hurdle.  Most buyers know not to value some digit piece near what it’s worth by itself.

When it’s time to sell the company, the financial situation of apiece partner has no doubt changed since the company was founded.  The consideration for the company could be all cash, all stock or a combination of change and stock. The tax implications of apiece of the three scenarios are different for apiece partner.  I have seen the impact of divesting a company go up in smoke too many times because the partners didn’t agree on the proposed deal.  They spent years growing the business then totally disagree about when to sell, who to sell to, and/or how much to sell it for.   

Business is about return on equity, not “all for digit and digit for all”.  My suggestion … digit ship, digit captain.