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Getting into a business partnership has its benefits. It allows all contributors to split the stakes in the business enterprise. Depending upon the risk appetites of spouses, a company can have a general or limited liability partnership. Limited partners are only there to give financing to the business enterprise. They’ve no say in company operations, neither do they discuss the duty of any debt or other company obligations. General Partners function the company and discuss its liabilities as well. Since limited liability partnerships require a great deal of paperwork, people usually tend to form general partnerships in companies.
Facts to Consider Before Establishing A Business Partnership
Business ventures are a excellent way to share your gain and loss with somebody who you can trust. But a poorly executed partnerships can turn out to be a disaster for the business enterprise.
1. Being Sure Of Why You Want a Partner
Before entering a business partnership with a person, you need to ask yourself why you want a partner. If you are seeking just an investor, then a limited liability partnership should suffice. But if you are working to create a tax shield to your business, the general partnership could be a better choice.
Business partners should match each other in terms of expertise and skills. If you are a technology enthusiast, then teaming up with a professional with extensive marketing expertise can be quite beneficial.
Before asking someone to commit to your business, you need to understand their financial situation. When starting up a company, there may be some amount of initial capital needed. If company partners have enough financial resources, they will not need funds from other resources. This may lower a firm’s debt and boost the owner’s equity.
3. Background Check
Even in case you trust someone to be your business partner, there’s no harm in performing a background check. Calling a couple of personal and professional references can give you a reasonable idea about their work ethics. Background checks help you avoid any potential surprises when you begin working with your business partner. If your company partner is used to sitting and you aren’t, you can split responsibilities accordingly.
It’s a great idea to check if your spouse has some previous experience in conducting a new business venture. This will explain to you how they performed in their past jobs.
Ensure you take legal opinion prior to signing any partnership agreements. It’s important to get a good understanding of each policy, as a poorly written agreement can force you to run into liability problems.
You need to be certain to delete or add any appropriate clause prior to entering into a partnership. This is as it is cumbersome to create alterations after the agreement was signed.
5. The Partnership Must Be Solely Based On Business Terms
Business partnerships should not be based on personal connections or preferences. There should be strong accountability measures set in place from the very first day to track performance. Responsibilities should be clearly defined and performing metrics should indicate every person’s contribution to the business enterprise.
Possessing a weak accountability and performance measurement process is one of the reasons why many ventures fail. Rather than placing in their attempts, owners begin blaming each other for the wrong decisions and leading in company losses.
6. The Commitment Amount of Your Business Partner
All partnerships begin on friendly terms and with good enthusiasm. But some people today eliminate excitement along the way due to regular slog. Therefore, you need to understand the commitment level of your spouse before entering into a business partnership together.
Your business associate (s) need to be able to show the same level of commitment at every phase of the business enterprise. When they don’t remain committed to the company, it will reflect in their work and could be detrimental to the company as well. The best way to maintain the commitment level of each business partner would be to set desired expectations from every individual from the very first day.
While entering into a partnership agreement, you need to get an idea about your spouse’s added responsibilities. Responsibilities such as caring for an elderly parent should be given due thought to set realistic expectations. This provides room for empathy and flexibility in your work ethics.
7. What’s Going to Happen If a Partner Exits the Business Enterprise
This could outline what happens if a spouse wants to exit the company.
How does the departing party receive reimbursement?
How does the division of resources occur among the rest of the business partners?
Moreover, how will you divide the duties?
8. Who Will Be In Charge Of Daily Operations
Areas such as CEO and Director need to be allocated to appropriate individuals including the company partners from the beginning.
When each individual knows what is expected of him or her, then they are more likely to perform better in their role.
9. You Share the Very Same Values and Vision
Entering into a business partnership with somebody who shares the same values and vision makes the running of daily operations much easy. You’re able to make important business decisions fast and establish longterm strategies. But sometimes, even the very like-minded individuals can disagree on important decisions. In such scenarios, it is vital to remember the long-term goals of the business.
Business ventures are a excellent way to discuss obligations and boost financing when establishing a new business. To make a business partnership effective, it is crucial to find a partner that will allow you to make fruitful decisions for the business enterprise. Thus, look closely at the above-mentioned integral aspects, as a feeble partner(s) can prove detrimental for your new venture.