Considering a handshake deal? Read this first

You’re going to start working with another local business owner. It should benefit both of you. Maybe you need parts and supplies for your end products, for example, and the other owner can provide them. They get the sale upfront and you make your money back -- and more -- when you sell your products. Everyone wins. As you sort things out, though, you ask who is going to write up the contract for you both to sign. The other business owner waves it off and extends their hand. They tell you to just shake on it and then you can trust them to hold up their side of the bargain. This is a massive risk. Some experts say you should never do it. A handshake deal gives you no paperwork, no proof of the deal, no written obligations and no clarification on things like costs, quality, delivery dates and many other key parts of this arrangement. If they break the deal by not delivering the parts or not doing so on time, you can be stuck eating the costs as your customers cancel delayed orders. It can be hard, though, especially at that moment. If you turn them down, will they be insulted? Will they think you don’t trust them? Could you lose the partnership entirely? It is possible, but it may be a risk you want to take. You need to protect yourself and your company, first and foremost. That means understanding exactly what legal steps to take and avoiding unnecessary risks. If you lose the deal on those grounds, it may be one you’re best off losing.