There are numerous advantages of forming business partnerships, as it enables a person with an opportunity to combine his/her resources as well as the skillsets he/she doesn’t possess with another person for better business prospective. That is the importance of partnership in business and there fore a lot of entrepreneurs and established stalwarts are opting for it. Forming a Business Partnership can be a valuable asset to help business leaders disperse risks, share ideas and make more money. However, entrepreneurs should take time to consider some tips for a successful business partner and think through all the details of a partnership before they decide to ultimately go for it, because there might be some important factors to consider in partnership.
Some of the key factors to consider before going for business partnerships are as follows:
Sharing Similar Ideologies
One of the most significant aspects of a nurturing a good business partnership is sharing mutual short-term and long-term values as well as goals. Though this doesn’t necessarily mean you have to agree on everything with your business partner, but too many disagreements can hurt the business over in the long run. In more than many ways, a business partnership is similar to a marriage. With your business partner, you need to have shared values and ensure the proper flow of communication with one another through all the levels of running your business.
Setting Expectations from the Beginning
Running a business, takes a lot of work. And therefore, it is necessary to clearly outline the roles and responsibilities of both partners from the very beginning. Sometimes, it can be helpful to plan a job description that both the partners need to stick to, just like in a traditional job. While this planning, outline what each person has to contribute to the business in terms of time, money and responsibility. Illuminating these prospects from the very beginning can help you as well as your business partners to avoid problems later on.
Managing the Finances
The goal of any business is to produce a profit, and therefore, it’s important to plan how are you going to manage the business finances. Though this can be a complication for some business partners but it’s important to speak your ideas about money from the very beginning. Will both partners be contributing their personal income for the business growth? Are both the business partners comfortable about taking on debt? Apart from these questions, factors like managing the business finances and reinvesting in the business, should be thoroughly discussed between both the business partners.
Decide Your Legal Business Structure
While deciding on your legal business structure, there are three main types of partnerships you can basically select from: a general partnership, a limited partnership and a limited liability partnership. The benefits of selecting a general partnership are that it’s quite easy to set up, with no ongoing fees to pay. However, a general partnership delivers very little liability protection to both partners. In a limited partnership, at least one partner has unlimited liability, and the other partner has limited liability, so that their personal assets cannot be tied to the business. A limited partnership is typically selected when both partners have dissimilar levels of participation in the business. Meanwhile, a limited liability partnership confines each partner’s financial accountability to the business, ensuring the most protection to both partners.