Two friends entering into a business relationship more often than not opt to go the route of a 50/50 partnership because it seems like, well, the fair thing to do.

But experts argue that going 50/50 is not always the best thing to do and is frequently a recipe for disaster.

The 50/50 partnership is when two parties agree to pool resources – financing, knowledge, assets etc – together in the running of a business and split the resulting profits

or losses equally. It’s a very simple, straightforward arrangement which, on the face of it, leaves little thought for concern — afterall, persons usually go into business with someone they “know” is easy to work with, trustworthy and reliable. But industry experts say the model is vulnerable to several pitfalls which have lead to the best of business concepts and friendships falling by the wayside.

Firstly, the 50/50 partnership agreement often times not only involves an even split of profits or losses, but also authority. This type of power-sharing is said to be dangerous because partners often differ in perception of what direction the business should take going forward.

“Potentially, the arrangement will always be in conflict,” says corporate governance expert Vindell Kerr. “There are gonna be huge conflicts in decision making.”

Small Businesses Association of Jamaica president Dalma James agrees.

“It’s a complicated case…there’s a whole range of decisions which cannot be made unless both parties agree,” he tells Sunday Finance, emphasising “You don’t want, after the first decision is made, a man just gets up and goes home…and you have alot of those cases.”

Sometimes in such cases, the matter is brought to a court which may rule that the business should be dissolved — not the outcome any entrepreneur would want for their brainchild.

Another problem of the 50/50 partnership agreement is that, although equal in concept, it’s rarely “50/50” in practice. Frequently, the contribution of skill and time by the partners into the business is unequal, which will lead to conflict. The Quebec Bar Foundation, which plays a leading role in the field of legal research in Canada, provides a vivid example by painting the following scenario in one of its publications.

“You’ve been in the renovation business with Julie for two years. In the beginning, you both agreed to be equal partners, and each of you put in $10,000 cash. Today, you often disagree on the amount of work each of you should do,” says the foundation, adding “For the past six months, you’ve been spending at least 60 hours a week on the business whereas your partner Julie has put in 40 hours at most. However, she claims to be entitled to half the profits from the business. You find this unfair and want to do something about it.”

But the 50/50 partnership can indeed be feasible if there is an ownership agreement clearly dictating, among other things, how decisions will be made within the partnership and work requirements of each partner.

“What I’ll advise young entrepreneurs to do if they have to go that route is sit down and work out an operational agreement in clear terms who will be responsible for what and those decisions clearly will have some amount of authority,” says Kerr, who is CEO of management advisory and corporate training company GovStrat Limited.

And James advises that the contract must specifically state what mechanism will be used to break a tie in the decision-making process.

“For instance, you might say (in the contract), in case of a tie, the issue goes to a mediator and partners agree to whatever the mediator rules,” he says.

Even with an ownership agreement, most experts are not completely sold on the often implemented 50/50 partnership agreement, but they say it allows for the best compromise.