He learned the hard way that 50-50 partnerships fail more often than they succeed. Here's his story in his own words:

In November 1996, I approached an acquaintance I'd known for about six months with an idea for a startup. After several meetings and some due diligence, we agreed on a 50-50 owner relationship. We filed as a California corporation in February 1997 and started bringing in revenue. In fact, we took the company from $1,000 to about $56,000 per month in less than a year, bootstrapping it all the way. We had everything going for us.

My partner and I had built not only a company but a relationship. In all aspects of business and personal interaction, ours was a relationship built on mutual trust and understanding. (My partner was acting CEO and CFO.) But looking back now, I didn't question the financial status of the company enough. We didn't have a system of checks and balances in place.

In December 1997, we began to value the company to issue stock to our employees. My partner devised a scheme that valued his own worth at almost a 2:1 ratio to my worth. He was trying to make the 50-50 partnership a 70-30 partnership. After trying to negotiate and realizing that he would not budge from his position, I sought legal counsel. By early February 1998, I filed for dissolution of the corporation.

What's my advice if you're thinking of starting a company with a partner? As with any relationship, marriage or business, trust is everything. Look deep into a person's soul, get to know him or her well, and examine qualities you like and dislike before you enter into a long-term relationship.

Also, it never hurts to have an attorney on your side. Do it right the first time, and you won't have to do it again.
 
 

Source: Ed Haris, Forbes, Feb 22, 1999
               Ed Harris is now CEO of Solid Integration in San Jose, California.