It may appear that forming a partnership is simple, especially if you know someone who is also interested in starting a business. However, when it comes to forming a general partnership, things get a little more tricky. While many small and medium-sized business owners choose the sole proprietorship as their business structure, a partnership may be more advantageous if two partners can bring in more capital, working knowledge, and business contacts.
Learn how to form a partnership and reap the rewards of doing so with a like-minded business partner.
- Have similar objectives to your companion. If you don’t have mutual interests and goals for your firm, your partnership will fail. The decisions you and your partner make will have a significant impact on how the firm implements its strategies. Setting goals with your partner at the outset of a business is excellent, and aiming high on achieving those goals is ideal.
- Assign roles in the business. Each partner in a partnership brings his or her own set of skills and contributions to the company’s success. Establishing business responsibilities is critical in order to utilize each partner’s skills. Recognize the tasks at hand and distribute them evenly depending on your particular capabilities and abilities. If the partnership is based on capital or money, make sure to define the work division and, if applicable, the revenue sharing system.
- Recognize the common ground. If you’re concerned about what will happen if you decide to end the partnership in the future, you should know that, in most circumstances, the obligations and rewards of the partnership are evenly distributed based on the number of partners participating.
- Open up your lines of communication. Ensure that your communication routes are open, even if you have distinct functions to perform in the company. As partners, you must stay in touch with your business partner to ensure that everything is running well and according to plan. Examine the company strategies and be open to recommendations in order to advance your career.
- Set up a joint venture agreement. Regardless of the type of company or industry you are entering, your partnership may be entirely based on the overall business structure that you are considering. Whatever partnership form you choose, make sure to put it in paper. Create a partnership agreement to spell out the roles and responsibilities, as well as the revenue split. Although the 50/50 rule may apply, it is still preferable to have a written partnership agreement that details the responsibilities and benefits discussed.
Aside from the partnership agreement, you’ll need to apply for a business license that specifies “partnership” as the business type. Remember that as a partnership, you and your partner(s) will be personally liable for the acts of the firm or corporation. Consider forming a limited-liability corporation (LLC) if you want to create a new organization to handle your firm or if you already have too many partners.