What you need to do when you opt for co-ownership

Taking up risks for an entire company as an individual may be too risky and overwhelming but have you thought about having a partner with whom you can co-own the company? Here is what you need to know before co-owing a business.

The co-ownership with a sibling, partner or a trusted friend may be an incredible experience but only if you are keen right at the start of your partnership.
In such an instance, there is more than one risk bearer compared to a sole ownership of a business and the financial and managerial roles are shared.
The success of such partnerships largely depends on the people who own it and if you want to earn the best out of them, it is important that you take the following precautions.

The skills
Patrick Ngolobe, a human resource consultant with Africa Executive Leadership Solution, recommends that there should be a criterion for selecting the person you co-own with the company. The person should have a particular skill that you require and you do not have.
“The person should be able to add value to the company not just anyone. They should be able to grow the company and align with the mission and values of the enterprise. It can also be about their cash contribution towards the enterprise.”

Discuss business objective
Jenny Epit Okaka, the human resource business partner at KCB bank says before you get into a partnership to co-own a company with someone, it is important that you discuss the aim of the business and what you intend to achieve in the short and long term.

See to it that the person you plan to co-own the company with has the same aim and objectives just like you do.
She says: “It could be about bigger projects that you may want to handle in future. Discuss the timeframe when you think these can be achieved and lay strategies on how to achieve them.”

Let your aim be clear right from the start to avoid arguments along the way. Or your company will not have a direction.
Even in cases where you find the company is already established and you want to buy shares, ensure that enough light is thrown onto the objectives and goals and evaluate if these are goals that are achievable and that you can work along with them.

Document
It is very important that you have paperwork for the co-ownership of the company to avoid any issues that may arise in future. Be very clear about who contributed what towards the project and how much shares each partner is entitled to.
Okaka says: “You may have written documents but it would be more professional if you hired a lawyer to help you document how you will legally own the property and who is entitled to how much shares.”

With the lawyer, you can also discuss the position each individual will assume and this will also determine the rights and property that you will be entitled to.
Also, have a long time plan on how the shares are to be distributed in case of death. If the co-ownership was between a couple, in case of death, the shares automatically become for the remaining partner. In the other cases, the shares may be sold to other interested individuals or go to their children.

Share responsibilities
Depending on the skills possessed by each of the shareholders, decide ahead of time who will be responsible for what.

Also ensure to split expenses proportionally according to each co-owners’ percentage share in the property. This is the advantage with co-ownership. You do not have to bear the expenses alone. Even when you incur losses, you have to bear the strain relative to the number of shares one has in the enterprise.

Ngolobe advises: “Determine who is supposed to do what, when and how and as partners, keep in constant communication. Have monthly records about incomes and expenses to ensure transparency and accountability. Some of the responsibilities may include rent fees, repairs and maintenance, security fees, marketing and advertising, licensing.”

Check out the business
If a friend asks you to join their company to co-own it, as a new person, it is important that you do background study about the business.
If you are going to invest your money and skills, you should check if the enterprise is dealing with a legal product or service. The other person should have good reputation in the public and not a criminal.

Do due diligence
Ngolobe recommends that you do your due diligence. He says: “Some businesses are in bad books with KCCA or the Uganda Revenue Authority. You do not want to invest your money in an enterprise that is being hunted down and in less than a month you are in jail.”

The other person should be able to disclose as much as possible about what is happening in the business including tax remittances, the amount of profits the business makes, its financial position, the opportunities as well as the challenges the company is likely to face so you can plan together how to achieve your goals.

Contribution to partnership
Make sure you clearly lay out each partner’s stake in the formation and ongoing finances of the business. How much will each partner contribute to start the business and what will each partner’s responsibilities be for future needs? In your agreement, define what each partner will put forth—not only in the amount of money, but also time, effort, customers, and equipment.
- Forbes

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