THE BLOG
08/27/2014 06:22 pm ET | Updated Oct 27, 2014

Heed These 7 Warning Signs to Avoid a Potentially Toxic Partnership

A bad business partner is like a bad marriage, but with one exception: It's easier to get a divorce than to get out of a bad partnership.

Years ago when I was raising money for my first venture, a wise investor pulled me aside, and asked me what I knew about my business partner. When I asked him why that was important, he told me that many people go into business with partners they really didn't know well - and once the business was flourishing, the partner turned out to be a real burden.

Man, was he right! My partner turned out to be a clueless moron with no business acumen and a strong sense of self-importance, who screwed up every deal we came within striking distance of closing. Eventually, we shut things down and neither of us made a dime. If I had only known then, what I know now, things would have been quite different.

As I progressed through my career, I have witnessed many business owners with partners that put tremendous strains on the business and the relationship. I have seen a variety of partners who broke down in tears at meetings, screamed and yelled at the drop of a hat, actively stole from their partners, threatened lawsuits to get their way, did little or no work (but expected to share in the profits), and some that were certifiably crazy.

How do you prevent yourself from partnering with a potential lunatic, litigator, or loafer? Obviously, you need to know them well enough to see their faults. However, if you haven't worked with them for a number of years, then you need to talk to their previous partners, colleagues, peers, and employees. Typically, they can shed some light on the person's experience and behavior. Here are some warning signs that you should be alert to:

  1. He/she lies. If you are constantly catching your potential partner in a lie, there is every reason to expect this behavior will continue in a partnership. You can't work with someone you can't trust.
  2. He/she is more concerned with money than the business. If everything always comes down to money - beware. It will be difficult to make rational business decisions and investments in the business if you are constantly fighting over where the money goes.
  3. He/she makes excuses. If your potential partner seems to always have an excuse, and takes little responsibility for their actions, this behavior will cripple your business later.
  4. He/she doesn't like to work. There are partners who expect you to do the heavy lifting while they sit back and profit from your work. No one wants to see their partner getting a profit distribution when they did little to earn it.
  5. He/she is a control freak. They want to control the business, and you. They start arguing about titles and authority, and make every decision an ordeal because they have to win.
  6. He/she threatens you. A potential partner that threatens to involve attorneys or sue you, is not going to make your life easy down the road whenever a conflict arises.
  7. He/she exhibits erratic or emotional behavior. When you have a business partner who is unstable, your life becomes a living hell as you spend all of your emotional energy managing their outbursts, and subsequently apologizing to employees and customers for their bad behavior.

If you can avoid teaming up with a bad partner, you'll reduce the chances of having a failed business, and the amount of stress and frustration that these poor partners cause you during all of the years of your partnership.

Divorces are easy compared to getting out of a bad partnership. Have a solid operating or shareholder agreement in place that covers the complex issues of splitting the business or buying each other out. You don't want to have to "wing" it if things aren't going well and you want to get rid of your partner.