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The Partnership charter

The Partnership Charter by David Gage Millions of people co-own closely held companies, family businesses, and business partnerships, but establishing them and keeping them together is never easy. Here, finally, is the guide they have been waiting for.... Read More

Howdy Pardner: Before Hanging Out a Shingle Together, Advisors Must Make Their Expectations Well-known

Advisor Today

by Lucretia DiSanto Jones
Advisor Today
December 2004

Before you sign on a partner, make sure you both see eye-to-eye on the direction of the business.

Many insurance and financial advisors, at some point in their careers, consider forming a partnership with another financial professional. If you’re one of them, says David Gage, you need to take a serious, soul-searching look at the risks of a partnership, ask yourself some critical questions before jumping in, and create what he calls a partnership charter.

Gage is the founder of Business Mediation Associates, a mediation and consulting firm based in Arlington, Va. His book, The Partnership Charter – How to Start Out Right With Your New Business Partnership (or Fix the One You’re In), is a guide to both creating and sustaining successful business and professional partnerships.

Getting into a partnership can be as easy as hanging out a shingle for yourself and your partner. Getting out of a partnership isn’t as simple, so Gage suggests that everyone hoping to enter a business partnership ask “and honestly answer” these four critical questions first.

Why do you want to own a business?

Potential partners must answer this question to make sure they’re on the same track in terms of what they want the business to accomplish. “It may sound strange,” says Gage, “but people will start a business with different goals in mind. You and your partner must be thinking in similar terms about the level of commitment, the level of revenue and income, etc., to make sure you’re in sync.”

Why do you want to have a partner?

Gage says this question helps those considering a partnership address their expectations about what the other partners are going to do for them. “We’re not just talking about who’s contributing what money,” says Gage. “We are talking about the skills and experience and contacts, because people value different things. Sometimes they hope their partners recognize what they’re bringing, but without a discussion about it, there’s no way to be very sure they value the same things.”

Are there better alternatives than taking on a partner?

“Sometimes people take on partners for all the wrong reasons,” says Gage. “It might be a financial reason, or it may be because they are afraid of doing it alone. Taking on a partner is a complicated relationship, so you have to look at the alternatives.”

Is the person you are choosing the best partner for you?

Many insurance and financial advisors work in the same firm for a while, and then decide to break away to open their own shop. The preexisting relationship doesn’t necessarily mean that the advisors’ values and styles match.

“Co-ownership is a very different deal than working in an office together. Most people don’t do much in the way of looking deeply at their styles or values. This is unfortunate because it so often gets in the way and creates difficulties among partners. There are some fairly simple and easy-to-acquire tests that will give people really solid feedback about their styles and values,” says Gage.

A partnership charter

Advisors who decide to form a partnership can significantly minimize the chances of the partnership not working, Gage says, by developing a partnership charter before going out and conducting business.

A partnership charter is a document that addresses both the business and personal sides that exist in closely held businesses. According to Gage, it outlines the expectations, responsibilities and goals of the partners. It also helps partners address issues like values, ownership, power, money, governance, compensation, bringing on a new partner and more. What the partnership charter is not, Gage carefully points out, is a legal document.

“Legal documents are contracts that are narrowly crafted to create partners rights and duties, to deal with control and to protect the partnership from other people-employees and others who might sue them,” says Gage.

The purpose of the partnership charter is broader. It serves as a guide for running the business and dealing with each other. “I talk about the partnership charter as insurance,” he says. “It gives partners more confidence that the partnership will work the way they want it to work.”


  • Your partner shares the burdens and responsibilities.Someone else can do jobs that don’t play to your strengths or interests.
  • The partnership opens up opportunities that otherwise would be beyond your grasp, including greater success.You can move faster to take advantage of opportunities.
  • You can enjoy camaraderie with an equal instead of feeling alone at the top.
  • There’s the potential for synergy and better decision making at the very top of the company.

Source: The Partnership Charter: How to Start Out Right With Your New Business Partnership (or Fix the One You’re In), David Gage.