“Happiness is only real when shared” – Christopher McCandless. If what Mr. McCandless says is true, is success also only real when shared? Obviously, you CAN be happy and successful all alone. But how much greater is your happiness and success when shared with another? The first of the advantages of a partnership business is that two heads are better than one.
Advantages of a partnership business:
It’s like a marriage!
Starting with the basic premise of a partnership business, think of a marriage in the functional sense. From child-rearing to finance, a husband and wife share in all of life’s responsibilities – each contributing based on strengths, desires and commitment. There may be individual life goals, but some of the important advantages of a partnership business are those shared goals that you work toward together. So a partnership business is like a marriage, in function.
Let’s explore some parallels between a partnership business and a marriage…
Partnership business requires commitment
It all starts with commitment. Marriage begins with vows. As such, a partnership business must begin with a contract. This is one of the advantages of a partnership because it’s legally binding and holds both parties accountable. When you’re accountable for something, you strive to succeed regardless of your emotions and feelings.
Once your partnership business begins, you and your partner will be liable for everything related to the business – and it’s not 50-50 – it’s 100-100. If one partner is unable to pay for a liability, the other will be 100% liable. So another one of the advantages of a partnership business is that it requires 100% commitment from each party.
There are laws which automatically govern a partnership business – no contract needed. But it’s always better to put everything in writing.
Partnership business contract vs marriage vows
Prepare a contract ahead of time. Define all of the roles and responsibilities. Outline what you’ll be committing to and what you’ll be expecting from your business partner.
Carefully outline all of the details of your partnership business commitment. You can compare this to writing your marriage vows. This will set the stage for transparency and harmony.
A partnership business is a business, so there must be a business plan. From your pre-launch business plan, to your long-term business plan, this should all be laid out and agreed upon ahead of time. The goals must be set.
Then, both of you will be fully responsible for the business plan execution – meeting those goals. That’s the most important part. So hold each other accountable for meeting those shared goals as you progress together.
Two bosses can share the responsibilities
In a partnership business, you’re both in charge, equally. So the idea of going into business to be your own boss is now a shared responsibility. In one sense, you WILL be your own boss in a partnership business. You have no manager above you. You only report to YOU. But you have an equal accountability partner. So you must manage the business together.
Management responsibilities should be divided up according to roles, strengths and weaknesses. As you grow your business, these responsibilities must become clear and distinct. In the absence of your partner, you’ll manage everything. But during normal day-to-day operation, your management responsibilities should be well defined.
You complement each other
In marriage, you “complete” each other. But in a partnership business, you “compliment” each other. A good business partnership will include a diverse, complimentary skill-set.
Evaluate your strengths and weaknesses. Then compare them to those of your partner. If you find that you complement each other, you’ll be a match made in heaven!
Partnership business structures
There are a few legal structures which exist for a partnership business. Some are complex while others are very simple. Let’s look at each one…
This is the simplest form of a partnership. It’s like a sole proprietorship. All partners are each 100% liable for everything. And you’ll share all profits and losses equally. But you’ll pay taxes individually based on your share of those profits and losses.
Limited Partnership (LP)
In an LP partnership business, there must be at least one general partner and one limited partner. But there may be more. The general partners hold all liability and are completely in charge.
Limited partners are not liable for company debt. They also hold no authority. And they don’t manage anything unless stated in a contract. They’re similar to corporation shareholders who receive dividends.
So if you’re a trusted entrepreneur, you may be able to form an LP to gain investment yet still maintain control of the company.
Limited Liability Partnership (LLP)
This partnership business structure insulates the partners from personal liability beyond their stake in the company. Personal assets are not at risk when problems occur unless uses as collateral.
So the difference between LLP and LP is there are no general partners and all partners share authority in the company. All partners manage the company equally.
These partners share in the profits and losses of a company, but they don’t manage. Also, their association is not public knowledge. Silent partners are usually investors.
Partnership businesses are not for everyone. You must be able to compromise and get along. There should be complementary skills and traits and a similar work ethic among partners to keep it balanced.
Document everyone’s intentions and expectations ahead of time. Then avoid problems by ensuring that all partners agree on those upfront. And ensure that all business activity is kept open and transparent among the partners at all times. So honesty and openness are a must in a partnership.
The advantages of a partnership business are huge. Two heads ARE better than one. You won’t have to face the challenges alone!
Thank you for reading:
Advantages of a partnership business to achieve shared success
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