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MNCLS’ Guide to Construction Partnership

Like any partnership — from lab partners to married couples — the success of a business partnership is dependent on a number of factors. Syncing up on values, strategy, compensation, and fostering clear communication throughout the duration of the partnership will be key. Without a set of “blueprints” to guide the construction partnership process and a clearly defined partnership agreement, disputes can arise.

The team at MNCLS has seen the good a construction partnership can do and the fallout that can come from a partnership that is not properly defined. So, we’ve put together this set of blueprints to help construction professionals navigate construction partnership — and live to tell the tale.

What is a Construction Partnership — and Why Does it Matter?

In the same way that businesses in other industries may partner to increase cash flow, expand to new markets, and broaden margins, construction businesses can reap the benefits that larger firms enjoy. Construction partnership can be a creative solution to any number of business-related problems, and when done properly it can be a game-changer for the parties involved.

Partnership is not a full business merger. Rather, it’s designed to be a mutually beneficial agreement for both parties involved. You sell the ice cream, I sell the sprinkles — let’s help each other out. With material costs on the rise and labor shortages plaguing the country, construction partnerships might be the only thing keeping smaller firms from folding.

Blueprints to Build a Successful Construction Partnership

If you wouldn’t take on a project without a set of plans, you shouldn’t go into a construction partnership blind. Below, we outline the components of a strong construction partnership as well as what to do if one goes sour.

Put Your Partnership On Paper

Though handshake agreements may have once been the norm, even partnerships among friends — actually, especially partnerships among friends — should not be made without a written contract. Should a dispute arise among partners, a carefully drafted partnership agreement will be the first place mediators (or litigators) will look. This partnership agreement should outline:

  • The responsibilities of each partner;

  • How profits will be shared;

  • The distribution of liability, and;

  • What the path for conflict resolution will be.

An expert-written partnership agreement can prevent disputes from arising and, more importantly, outline what happens when they do. Therefore, this agreement will be your partnership’s North Star.

Make Sure You Have Compatible Values

While you and your freshman year lab partner may have been the furthest thing from an ideal match, your construction partner’s values should neatly align with your own. Construction partnerships — though they may lack harmful chemicals — rely heavily on chemistry. Whether it’s the direction you aim to take your partnership, the method in which you plan to do it, or the specific milestones you have along the way, alignment of values will be key to success.

This isn’t to say that differing opinions aren’t good for business. The partners at MNCLS don’t always see eye to eye, but varying perspectives often make for better decision making. Plus, at the end of the day, we all want the same thing: To provide our Minnesota construction clients with practical legal solutions.

Form the Right Type of Partnership

Much like independent construction businesses should have the right entity type for their needs, there are different types of construction partnerships suitable for different dynamics. MNCLS can help you make sure that you form the right type of partnership, which we have outlined below.

Limited Partnership (LP): A sole owner is responsible for decision-making, but other partners can share profits.

General Partnership (GP): Two partners more-or-less share business responsibilities, profits, and losses equally.

Limited Liability Partnership (LLP): Each partner operates a business, and is legally protected from the other partner. This is the most common form of construction partnership among MNCLS clients.

Keep it Fair

Though some might still view money as a dirty word, the topic should not be taboo when forging a construction partnership. Being up-front about compensation will prevent uncomfortable conversations down the road, and will help manage expectations so each party knows what they’re getting out of the deal. Ultimately, the goal of this partnership is to benefit both parties — so make sure that a fair compensation structure has been established for all involved before proceeding.

Communicate Clearly

The squeaky wheel gets the grease, and the only way for partners to know what the other party is thinking or feeling is to communicate. When issues arise, it can be far too easy to bottle them up until you’re ready to blow — but expressing concerns in the moment is far more productive for a healthy construction partnership. If speaking your mind in the moment isn’t you or your partner’s thing, consider scheduling routine conversations where you can take personal inventory. Though this might sound a bit like couple’s counseling, this near-universal relationship strategy will be of great use to your partnership.

Start Your Partnership the Right Way With MNCLS

Great risk brings great reward, and the path toward the numerous benefits of construction partnership can be a treacherous one. With an experienced guide like MNCLS, however, you can ensure that the benefits and liabilities of your partnership are clearly outlined — and that you’re protected from your construction partner in the event that things go south. To take the first step toward a successful construction partnership, contact the team at MNCLS.

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