Let’s say that you have decided to start your own business. However, you are unaware of how you should start. The first thing that you need to know is if your resources are enough to start the business. The capital you need depends on the kind of business you want to create. Suppose you have a type of business in mind that requires huge money, and you do not have enough. In that case, you may either think of another company that your resources can support, to load from a reputable financial institution, or loan from someone else. While most business owners seek help from financial institutions, some would also opt to share the business with someone else. So, instead of becoming just a solopreneur, you choose someone who would be willing to invest and, most importantly, share the same vision as you have.
What is a business partnership?
A partnership is a legal form of a business relationship between individuals who share the business management and profits. Partners have equal liabilities when it comes to obligations and debts. You cannot just have anyone on board without checking if he is the right person that can help the business. There are several factors to consider when choosing a business partner. And these are:
- A business involves money, and both of you must be on the same page concerning how to handle the business. The ideal business partner should be someone who shares the same goals and vision as you have. Your partner must believe in your ideas, and at the same time, you should also have established complete trust with one another.
- Both you and your partner should work hard and have the same enthusiasm in dealing with your business.
- Never choose a friend, co-worker, or a family member to be your partner just because you know them. Make sure that they have all the qualities of being a hardworking individual.
- You must establish a good line of communication all the time. As partners, your partner must talk and share what is in his mind rather than just letting you do all the work and not understanding what is going on with the business. Similarly, you don’t want to be left in the dark when decisions are made. Therefore, having a good conversation about the business is of utmost importance. The relationship you have with each other reflects in the company’s success.
- Lastly, your business partner should be a people person. He must have good relationships with other people. Having a vast network is very helpful in any business.
Benefits and Drawbacks of Partnership
And just like being a solopreneur, having a partnership has its benefits and drawbacks.
Advantages:
1. You have someone you can depend on, particularly when business is getting too demanding.
2. As others say, two heads are better than one. Therefore, if you think you are not aware of something, your partner can help solve a problem.
3. It lets you reduce financial problems. You don’t need to force yourself to let out a considerable amount of money. Having a partner allows you to put your money together to help support the business.
4. It allows you to become more productive. You can focus on things that need more attention while your partner helps you with other tasks; thus, it lightens the load and allows you to have a better work-life balance.
5. Disadvantages
6. Apart from sharing profits, partners also share in losses and debts.
7. You may like to completely control a business; however, having a partner limits your independence.
8. Conflicts may arise from differences of opinion. Sometimes, it is too difficult to draw the line between business partners and real-life friends.
Once you have decided to start your business as a partnership, be sure that you draft a partnership agreement. That discloses full details on how business decisions are made, how issues are resolved, and how to handle a buyout if the need to sell the business arises. Having this type of agreement will be worth saving the friendship. We all know that relationships turn sour after some time, mainly if partners no longer see the same things as before. And to avoid further conflicts, a partnership agreement will be your saving grace.
What should the partnership agreement contain?
The agreement should address the purpose of the business, the extent of authority, and the responsibilities of each partner. Here are some critical points which the contract should have:
1. Is it possible for each partner to share equal ownership and authority? (The percentage of ownership and allocation of profits and losses.)
2. How will the decisions be made? (You must clarify what type of consent a partner must obtain before they can obligate your company.)
3. How will the value be determined if one partner dies or decides to withdraw from the partnership?
4. When will the money be paid if one partner decides to withdraw from the partnership?
5. How do we resolve disputes? (Make sure to add a mediation clause should you and your partner come to a point where you get into a massive conflict. There should be a mediating body that could help iron out your differences.)
Make sure that you consult with an adviser before drafting your partnership agreement to ensure that every little detail is written in black and white. Having a business partner can help you succeed only if you choose the right one.
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You may contact Armando “Butz” Bartolome for questions and more information.
By email: aob@gmb.ph
FB Page: Armando Bartolome
Linkedin: https://www.linkedin.com/in/franguru/
Website: https://www.gmb.ph
