Managing a small company with a partner may be gratifying and difficult at the same time. It also has a number of benefits and drawbacks. Since it might be difficult to locate a trustworthy business partner, a lot of entrepreneurs choose to launch their ventures in collaboration with friends or family. Although it could appear simpler to pair with someone you know at first glance, that isn’t always the case. Furthermore, if done incorrectly, it has the potential to destroy a marriage, a friendship, or a family bond.
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Benefits and Drawbacks of a Collaboration
It makes sense to establish a business with a partner since a firm with two or more people has access to greater resources and experience than one person could. Additionally, you’ll probably begin with more money, a wider network, and more prospective clients.
Naturally, there are drawbacks as well. To begin with, you are sharing both the money and the control. As the only proprietor of your business, you are responsible to yourself. However, in a partnership, you have to answer to one or more other people.
Before we get started, let me give you a brief tip: don’t name your company after you and your partner. It restricts your ability to grow.
Take note of these pointers to keep issues from developing if you want your business collaboration to succeed.
Select A Partner Who Has Similar Skill Set
When looking for a business partner, don’t search for someone who is “just like me”. Rather, having a spouse whose skills balance your deficiencies and vice versa is essential to a successful partnership.
For instance, who will handle the other facets of managing a firm if you and your potential partner are both strong salespeople? It would be preferable for an introvert to work with an extrovert rather than another timid person. It’s preferable to work with someone who is detail-oriented if you’re not excellent with specifics.
Do you recall the adage, “the sum is the whole of its parts”? You are trying to create a better, more harmonious whole.
Choose a Partner Who Shares Your Values
Having said that, it is imperative that you and your spouse have the same beliefs and work ethics. Wait until you are certain that you have the same aspirations, objectives, and vision for your new company before you create a single word of a business plan.
Make sure you both have the same end goal in mind and are dedicated to working full-time. A business disaster waiting to happen is when one partner wants to create a legacy firm that they can pass on to their children and the other wants to sell the company as quickly as possible to the highest bidder.
Make careful to conduct your due diligence before entering into a business partnership with someone you don’t know well. Speak with their old coworkers if you can. Even if everything on their social media accounts doesn’t seem to be related to company, check them all out. Look up information about them online. Consult other experts in the field.
Checking their credit is a smart idea as well. Inform them that you believe they ought to look at your credit as well.
Write It Down
Clearly defining each partner’s tasks and obligations is essential since forming a partnership is a legal commitment. Draft a partnership contract. Think about the following:
Some company owners who associate with friends or family believe they may operate without a formal legal partnership agreement. That might be harmful. It is important to have legal documentation prepared when beginning a business, regardless of your business partner.
Make a What-If plan
You must anticipate potential problems and make plans for every scenario. What happens, for example, if you divorce and continue doing business with your spouse? Who is granted custody of the business?
The partnership agreement should cover the procedures for a possible split up front, even if it might seem early. What would happen to the company, for instance, if one of the partners decided to quit, retired, or passed away? Will the leaving partner have to sell to an outsider, give their shares to their family, or offer them to the surviving partner first?
Consult a lawyer to assist you in creating a partnership agreement.
Choose the Appropriate Business Structure
There are three types of partnership structures: limited, general, and limited liability. Alternatively, you might decide to set it up as a S or C corporation. Regarding continuity, taxes, and responsibility, each type of business has pros and cons. To assist you and your partner decide which type of business is best for you, have a conversation with an expert adviser or attorney.
It is highly advised by many professionals to incorporate your partnership in order to shield the partners from any debts or obligations of the business.
It might be difficult to choose the ideal business structure, so it’s advisable to speak with an accountant to be sure you’re making the right decision.