I remember what is probably an apocryphal story about the Lone Ranger and his sidekick, Tonto riding over the ridge to face a large band of hostile Indians.  The Lone Ranger says, “I think we’re in some big trouble here, Tonto.”  And Tonto replies, “What you mean ‘we’ Kemosabe?”   Oops – friend or foe?

Partnerships of all kinds have been around a long time and served many business interests well.  Think about Hewlett and Packard, Larry Page and Sergey Brin, Rogers and Hammerstein, among many.

But the word “partner” is often misunderstood and misused.  Your attorney will tell you the pain and suffering can be brutal.

“Real” partnerships are business entities registered as such, and the players purportedly know the rules.  I find other people often use the term loosely, and their meaning or intent can be very different from what the listener understands.

John and/or Sally and I are “marketing partners” or “venture partners,” or “we’re partnering on this project.”  You’ve certainly heard this many times.

What are the “rules”?

Legally, partners are deemed to have joined forces – “for better or worse, richer or poorer,” etc. – and to have “joint and several” liability.  This means each partner is fully responsible to perform or pay for whatever business agreements or obligations other partners promise or agree to.  (See this entry in Wikipedia –http://en.wikipedia.org/wiki/Joint_and_several_liability.)

The danger is this legal meaning can apply to implied or “advertised” partners (John, Sally and you!) when there is a client problem or a financial loss.  The client or another “injured party” can sue any one of the “partners” for the full amount of the obligation.  Not knowing the rules can have nasty consequences.

Say John leases a nice office space for the “marketing team” just before your best laid plans implode.  He’s got no assets – guess who gets to foot the bill?

Staying out of trouble!

  • Ban the word partner from your vocabulary unless you really are one!
  • Find other appropriate terms to describe people you may work with – like associate, colleague, etc. – and be diligent in your use of terms.
  • Protect all parties working together by using attorney-provided Teaming, Associate or Subcontractor agreements between you and your colleague(s). And be sure to deal with the “joint and several” problem up front.
  • Be clear to clients and others that you are separate and independent business entities.  You can be working together to help solve a client’s problem, but you are not partners!

What are your experiences? Do you have stories about legal misunderstandings?   Share your story in the comments area!

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