From time immemorial–merchants, traders and seafarers have found themselves a partner-in-crime before getting on that ship that took them far far away from where they first started. The trend started a long time ago, and it continues to persist because there’s nothing quite like having a partner–or many partners–in crime.
Working alone is fun if you like making all the decisions or shy away from the company of others. But if you, like me, love the idea of having a partner–or many partners–in crime, then starting a business as a partnership may just be the right decision for you.
But before you bid your day job and your friends and family adieu, there are a few things to consider. Firstly, there are many ways to structure and organise your business. From sole proprietorships to partnerships to corporations–there are numerous viable options for the person or people who are looking to venture forth and embark on the adventure of starting a business from scratch.
A partnership is a unique type of business structure. It requires at least two owners, but it could have many owners. The partners share in the benefits and drawbacks of the business–based on the written agreement that they signed when they entered into the partnership. And yes, you should negotiate what is written and signed upon. Better argue and bicker now than later, I say.
Some partnerships include individuals who work in the business, whilst other partnerships have limited partners who are sometimes known as ‘silent partners’ because their contribution is limited. For instance, a partner’s liability can be limited if they are an investor who doesn’t get their feet wet in the running of the business. Limited liability in these cases means that the person is only liable up to the amount of funds that they invested in the business.
Partners usually join a partnership upon the creation of the business–or later on–either by contributing capital or other assets to the entity. Another way to become a partner in a business, especially in a more established organisation, is to be hired as an employee and move up the ladder, as is the case with many law firms.
The incoming partner is usually someone who invests in the partnership and who brings capital and/or other assets into the business. The amount of the investment and other key factors; for example, the amount of liability the partner is willing to take on, will determine the partner’s investment and share of the profits and losses pertaining to the business year.
A strong partnership agreement addresses how decision-making power will be allocated and how disputes will be resolved. It should answer as many foreseeable “what if” questions about what happens in a number of commonly known scenarios. For instance, it should spell out what happens when a partner wants to leave the partnership or the requirements under which a new partner can join.
The best business partnerships will be able to evenly distribute the responsibilities, divide profits fairly as well as lay down effective communication channels. In comparison to a sole-proprietorship, having a partner will help ease the burden of running a business solo. It may, however, create many other problems.
Disagreements are common and unavoidable, but a willingness to communicate and compromise will smoothen out any bumps that you might face on the road together. If you are someone who wants to independently make all the decisions, then getting into a partnership probably isn’t the right path for you.
Partners are owners, not employees, so they generally don’t get a regular paycheck. Each partner receives a share of the profits and losses of the business each year. Payments are made based on the partnership agreement and the partners are taxed individually on their share of the profits. Some partners may receive a guaranteed payment for services like management duties.
The goal of all businesses is to continue on as a ‘going concern’ in its never ending attempt to reach its far-fetched goals. Having a wonderful or many wonderful partners-in-crime means you no longer have to fly solo. You now have a fleet with you as you traverse the scary yet incredibly exciting arena of commerce. You’ll have access to more knowledge, more ideas, more expertise, and more funds… and relationships that could possibly last for the rest of your lifetime.
A great business partnership makes you a better business owner, enables you to strengthen your blindspots and enhances your ability to do more than you ever could alone. In the end, this is something everyone needs to be relevant for a very long time and help your baby business achieve its objectives and key results.
There’s nothing quite like having a partner-in-crime… And if it’s a partner-in-crime with nachos, even better!
Author’s Note: Partnerships come in all shapes and sizes and laws vary depending on your country and state. It is important to get advise from a professional regarding whether or not a partnership is the right decision for you.