What to Consider When Your Plumbing Startup Takes the Form of a Partnership

Establishing a detailed operating agreement ahead of time is one of the things to look at when you’re launching your business alongside a partner

What to Consider When Your Plumbing Startup Takes the Form of a Partnership

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Plumbing startups can organize their companies in a variety of ways. In addition to sole proprietorships or franchises, plumbers can choose to form partnerships. How can a plumber benefit from working with a partner?

“Any time you’re going to partner, first and foremost, you’re looking at what each partner brings to the table,” says Dave Kaster, principal at Fidelis LLC, a certified business advisory service in Green Bay, Wisconsin. “If you’re bringing the same thing, then you may want to look deeper. By partnering are we able to pool our money? Are we able to cover all 24 hours of the clock, rather than 12? That’s all good, from the logistical aspect.”

Business decisions, not personal feelings, should lay the foundation for a partnership, Kaster says. Partners can fine-tune their plans by consulting with an attorney, financial adviser and business consultant. To establish the business as a legal entity, two or more owners can form a Limited Liability Partnership.

Plumbers often go into partnerships with everything hunky-dory, but things might not work out as planned in the long term. That’s why it is important for partners to agree on a set of rules from the outset. These rules should be incorporated into an operating agreement.

“You need to discuss every scenario you can imagine and put how that decision-making process will play out,” Kaster says. “Put that into the partnership agreement. Everyone needs to agree up front.”

He compares a partnership agreement to a prenuptial agreement drafted before a marriage. Business owners may feel uncomfortable drafting an operating agreement, but that agreement can save them a lot of misery and legal fees if things go sour. 

“The time for compromise is not while you’re negotiating the partnership agreement,” Kaster says. “The time for compromise is after, when you’re working together. If you compromise up front, you have to live with it forever.”

Read more about the various operating structures a plumbing business can take in this article recently featured in Plumber magazine: Taking a Close Look at Operating Structures.



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