Before You Go 50/50: Seven Questions to Ask a Business Partner

By Scott Reib | America's Legal Coach

Picture this. It's a hypothetical, but you may have lived some version of it.

Two friends are sitting in a coffee shop in Denton. One has the skills. The other has the contacts and a little money saved. They've talked about this business for a year. Somebody finally says, "Let's just go 50/50," and they shake on it. It feels fair. It feels like friendship.

Here's the problem. Fifty-fifty is a number. It isn't a plan. It doesn't say who decides, who gets paid, what happens when you disagree, or what happens when one of you wants out. Those are exactly the things that break partnerships.

I learned how much the paper matters before I ever went to law school. I was working as an authorized agent for a major telecom company, and my contract gave me the territory of Tulsa, Oklahoma and the surrounding counties. I built a system that worked. Then a new manager came in, reassigned my territory to an hourly employee, and sent me to the boonies. That experience showed me I had a knowledge gap that could hurt me as an entrepreneur. It's a big reason I studied law.

There's an old adage I lean on in The Shatterproof Entrepreneur: "If it's not written down; it didn't happen." Nowhere is that more true than between business partners.

Why a Handshake Isn't Enough in Texas

In Texas, the agreement that governs an LLC is called a company agreement. The Texas Business Organizations Code defines it as "any agreement, written, implied, or oral, of the members" concerning the company's affairs. Read that again. If you never write it down, you may still have an agreement. You just may not agree on what it says.

General partnerships are even looser. As I wrote in the book, "a partnership can exist even without any formal or informal agreement between its parties." And when one partner signs a contract the business can't keep, both partners can be sued, and the judgment holder can collect from either one.

So before you sign anything, sit down with your future partner and answer these seven questions. Out loud. Then put the answers in writing.

1. What Is Each of Us Really Putting In?

Ownership should reflect what each person brings, and people bring different things.

Hypothetical: Partner A puts in $40,000 in cash. Partner B puts in no cash but agrees to work full time without pay for the first year. Is that 50/50? Maybe. Maybe not. The decision you have to make is whether ownership tracks cash, time, or both. Then answer the follow-up: if the company needs more money next year, who has to put it in, and what happens to ownership if only one of you does?

Memories fade, and contributions get rewritten in hindsight. Write them down while you both still agree.

2. Who Gets to Decide What?

This is the authority question. Day-to-day decisions and big decisions are not the same thing.

Hypothetical: One partner finds the perfect office and wants to sign a five-year lease this afternoon. Can she do that alone? Agree now on the short list of decisions that need both of you, such as borrowing money, signing long-term leases, hiring, bringing in a new owner, or selling the company. Everything else can run on trust and speed.

Your agreement is where those limits live, so everyone, including the bank and your future selves, knows who can sign.

3. How and When Does Each of Us Get Paid?

Money conversations are easier before there's money.

Hypothetical: One partner works 60 hours a week in the business. The other works 15 and keeps a day job. Do profits split evenly anyway? Does the full-time partner get a salary first? When do distributions happen, and who decides? Bring your CPA into this one. Your CPA is a seat on what I call the Board of Key Advisors for a reason, and the tax side of partner pay matters.

When pay isn't written down, it turns into resentment. Resentment is expensive.

4. What Does "All In" Mean to Each of Us?

This is where the working relationship lives. Roles, titles, hours, and side projects.

Hypothetical: One partner keeps a consulting side business. Is that fine? What if a client of the side business starts to look a lot like a client of your company? Talk through who owns which part of the business, what full time really means, and what happens if one of you stops pulling your weight.

In the book's 10 Contract Questions, one of them asks, "Are rights, obligations, and duties clearly listed?" Your partnership deserves the same clarity as any vendor contract.

5. What Happens When We're Stuck?

A 50/50 split has no built-in tiebreaker. In The Shatterproof Entrepreneur, I list "potential for disagreements and deadlock in decision-making" as one of the cons of a partnership. It's real.

Hypothetical: One partner wants to open a second location in Fort Worth. The other wants to pay down debt first. Neither will budge. Now what? Decide in advance how you'll break a tie. Some partners name a trusted advisor to weigh in. Some agree to try mediation before anything else. The book's contract questions ask, "How will disputes be resolved?" and point to options like mediation or arbitration. The right answer depends on your business. The wrong answer is having no answer.

6. What Happens If One of Us Leaves, Gets Sick, or Dies?

Every partnership ends. The only question is whether it ends with a plan.

In the book I call the triggering events the 4 D's: Death, Disability, Divorce, and Departure. A buy-sell agreement is the tool that answers what happens next. In Chapter 19, I tell the story of the Three Amigos, three business partners whose life plans started heading in different directions. That's when they discovered they had never put a buy-sell agreement in place.

Hypothetical: Your partner passes away unexpectedly. Without a plan, you may find yourself working through the future of the company with your partner's family or estate, with no agreed price and no agreed process. Decide now who can buy, how the price gets set, and how a buyout gets funded, whether that's cash reserves, a loan, or insurance.

7. Who Owns the Name, the Clients, and the Ideas?

Hypothetical: One partner designed the logo and built the website before the company was even formed. Does the company own those, or does she? If you split up, who keeps the name, the phone number, the social accounts, and the client list?

Brand protection is a whole phase of The Shatterproof Entrepreneur for a reason. Get clear on what belongs to the company, and document it so the business owns what the business depends on.

Put the Answers in Writing Before You Sign

Your answers belong in a written company agreement or partnership agreement, and often in a buy-sell agreement too. Downloaded templates are tempting. In my legal career, I've seen how contract disputes can ravage businesses, and many of those contracts were internet-downloaded templates or were put together quickly without legal review. Ambiguity and missing terms are landmines.

This is the difference between a CAPTIVE owner and a Shatterproof one. Shatterproof glass still takes the hit. It cracks, but it holds together because of what was built in ahead of time. Your partnership can work the same way.

ACTION CHALLENGE: This week, block 90 minutes with your future partner. Each of you writes your own answers to all seven questions. Then compare. Wherever your answers don't match, that's your agenda for a conversation with your attorney.

From The Shatterproof Entrepreneur: Phase 1 (Ch. 2, Harnessing the Power of Legal Entities; Ch. 6, The Power of Documentation) and Phase 6 (Ch. 19, Business Succession Planning).

Talk to REIBLAW Before You Sign

Don't sign alone. If you're about to go into business with a partner, or you already did and nothing is in writing, let's talk before a disagreement turns into a dispute. We'll help you turn your answers into an agreement that fits your business.

Schedule a consultation with REIBLAW

Stay Shatterproof!

Frequently Asked Questions

Do we really need a written agreement if we're friends or family?
That's when you need it most. A written agreement doesn't mean you don't trust each other. It means you've already settled the hard questions while everyone is getting along, so the relationship doesn't have to carry that weight later.

What is a company agreement in Texas?
It's the Texas name for what many states call an operating agreement. The Texas Business Organizations Code defines it as any agreement, written, implied, or oral, of the members concerning the company's affairs. Putting yours in writing helps everyone know what was actually agreed.

Is a 50/50 split a bad idea?
Not necessarily. Plenty of partners split ownership evenly. The risk is going 50/50 without a plan for deadlock, decision-making, and exits. Equal ownership works best when the agreement spells out what happens when you don't agree.

What is a buy-sell agreement?
A buy-sell agreement sets out what happens to an owner's interest when a triggering event occurs. In The Shatterproof Entrepreneur, I group those events as the 4 D's: Death, Disability, Divorce, and Departure. It typically addresses who can buy, how the price is set, and how the purchase gets funded.

Can we just use an online template?
You can, but templates often miss the terms that matter most to your deal. Ambiguous or missing terms are where disputes start. Having an attorney review the agreement can help reduce that risk.

This article is for general educational purposes only and is not legal advice. Reading this article does not create an attorney-client relationship. For advice about your specific business, consult a qualified attorney.

About Scott Reib

Scott Reib, known as America's Legal Coach, is an attorney, entrepreneur, author, and speaker who helps business owners build companies that are protected, resilient, and capable of operating without depending entirely on them. He is the founder of REIBLAW and Shatterproof Solutions, the Official Zig Ziglar Small Business Lawyer, and the author of The Shatterproof Entrepreneur.