Partnership within a company is crucial, great partnerships are what separates the Tesco superstores from the corner shops. Having multiple like-minded, determined people building a company is much more efficient and effective than having just yourself.
The 3 Different Types Of Partnerships
Not many people actually know the 3 different types of partnerships that are in the business world. Here we will explain each one briefly so you can find out which one would best fit your situation.
General, or ‘ordinary business’ partnerships
These partnerships are a lot more hands-on. These partnerships are usually actively involved within the company, which means they’re personally liable to any dents the company can’t pay, as are you.
General partners must discuss any changes with each other that they wish to make, and must put forward any profits they make within the company so it can be equally shared. Each partner will be responsible for paying tax on his share of the business.
Limited Liability Partnerships
Limited liability partnerships (LLP) are more like investors. They will invest in the business in return for taking a market share. These partnerships are considered to be a corporate body that exists as a ‘legal person’ independently of its members.
The reason they’re called “limited liability” is because these partners aren’t liable for debt the business can’t pay. Their liability is limited to the amount of money they initially invested. These partners are normally active within a company.
If you want to set up a limited partnership you must register it as a limited partnership. Limited partnerships consist of both ‘limited partners’ and ‘general partners’.
The reason this type of partnership is split up is that any debts the business can’t pay are unequally shared between the partners. This means the general partners might have to pay off all the debts as limited partners are only liable for their initial investment.
Why partnerships are important
Partnerships have a long list of benefits, hence why every big company such as Facebook has them. There’s no limit to how many partners you can have, but there’s a limit to how much money you can afford to share, so you have to work that one out. Here are why partnerships are so important.
More capital available: Whether you’re just starting out, running low on capital, or need more money to help grow the business, partners are the best way to do this. No matter what type of partner you decide to bring in, they’ll come with an investment.
Shared responsibility: Having all the responsibility for yourself will only make things harder for you. Employees need paying, equipment needs fixing, suppliers are late, there are so many responsibilities a business owner has, sharing them will make everything a lot easier. You’ll also be sharing any debt the company falls into depending on what partnership you have agreed upon.
Two brains are better than one: Constantly coming up with new ideas is a massive struggle with solo business owners. Having partners will allow new ideas to flow which will grow the business. Partners are also good for decision-making. When you have to make a big decision like building a company logo, having a partner to consult with can help you make the best one.
Less paperwork: The more partners involved potentially means less work for you, but also less money. Having partners means you can take a little step back and delegate some work equally. This doesn’t mean you can dump all the work on your partners because you’ll be equal, but it does mean you can divide it.
Ways to build great partnerships
Building strong long-lasting partnerships can be a struggle at times. Think about it, you’re completely different people, with different morals and motives, so of course, there’s going to be obstacles. Although, there are certain things you can do to minimize these and strengthen the partnership.
Before you even consider starting a partnership with somebody, you need to make sure that you and your partner share the same dreams, goals, and have the same vision for the business. If you want to become a millionaire success, and your partner just wants security, you don’t share the same values and mindset. You need to make sure your values align to avoid future collisions and disagreements.
Make role’s and responsibilities clear
Although it’s good to have a friendly relationship with your business partner when it comes down to set roles and responsibilities, all emotion needs to be removed from the situation. Make it clear and equal from the very start, before papers are signed. This way when future obstacles occur, you aren’t only more organized but there’s no room for disagreements on who’s role/responsibility it is to deal with it.
Honesty is the best policy
From the very start always be honest with your business partner. If you’re caught out on lies, these will be instant red flags. It’s always hard to recover from a lie or cover-up, so just always stay on the same page and avoid lies or trying to hide something from your partner.
Chose a partner with complementary skills
Choosing a partner with complementary skills will fill in the areas where you’re weak. This way, you’re both adding equal value whilst keeping a strong business structure. For example, an introverted tech expert whose dream is to run an online business will match up perfectly with an outgoing salesman with good people and marketing skills. This also means both partners can do what they enjoy.
Prove your own worth
Proving what you’re capable of will build faith and trust with you and your partner. If you can show a track record, or prove your worth early on within the company, it’ll make your partner want to stick around, and maybe even work harder to match you. Setting up a business plan and setting goals will also show your business partner your intentions and future vision.
Get everything on legal paper
All emotions aside, everything needs to be in writing, especially if there’s money involved. Whatever your agreement is when it comes to salary, responsibilities, liabilities, initial investment, shares, etc, get it on legal paper. You should do this at the very start, or latest when you start making a profit so you’re both legally covered.
Business partners come in different forms with different responsibilities and liabilities. If done properly, a good partnership can make all parties involved hundreds of thousands. A great partnership can make you millions. Building a great partnership isn’t as difficult as you might think. You just need to make sure you and your partners are on the same page, have the same goals, and that everything is on legal paper to stay protected.
Obstacles will no doubt come between business partners, but if the partnership is strong these obstacles won’t be an issue to fix. Always remember when it comes to the legal business, do not involve emotions whatsoever. You’re here to make money, not find a new best friend.