“Happiness is only real when shared” – Christopher McCandless. If that’s true, is success only real when shared? Obviously, you CAN be happy alone. But how much better is your happiness when shared with another? The same can be said about success. Indeed, there are many successful sole proprietors. But two heads are better than one, right?
A business partnership is like a marriage
Starting with the basic premise of a business partnership, 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 the most important goals are those which are shared. So a business partnership is like a marriage, in function.
Let’s explore some notable parallels between a business partnership and a marriage…
Business partnership commitment
It all starts with commitment. Marriage begins with vows. As such, a business partnership must begin with a contract.
Once your business partnership begins, you and your partner will be liable for everything related to the business – and not in a fifty-fifty sense. If one partner is unable to pay for a liability, the other will be 100% liable. So a business partnership requires 100% commitment from each party.
There are laws which govern a business partnership, but it’s always better to put everything in writing. Prepare a contract ahead of time. Define the roles and responsibilities which you’ll be committing to and which you’ll expect from your partner. Outline the details of your business partnership commitment, like writing your marriage vows. This will set the stage for transparency and harmony.
A business partnership 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.
In a business partnership, 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 business partnership. 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 business partnership, 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!
Business partnership structures
There are a few legal structures which exist for a business partnership. Some are complex while others are very simple. Let’s look at each one…
This is the simplest form of a partnership and it’s like a sole proprietorship. All partners will each be 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 business partnership, 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 – 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 business partnership 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.
Business partnerships 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 benefits of a business partnership are huge. Two heads ARE better than one. And you don’t have to face the challenges alone!
Thank you for reading:
Business Partnership – Success Is Only Real When Shared
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