Thinking about taking on a partner? Remember, small business owners consistently rank things like freedom, independence, flexibility and the ability to make and act on decisions higher than money. Could a partnership compromise or jeopardize what business owners cherish most? How do successful partnerships make it all work?
Inc.com looks at basic advantages and disadvantages of partnerships (originally featured on the legal site Nolo.com). On one hand, partnerships are some of the easier business structures to establish and maintain. Partnerships should be based on trust, but those entering into them still need to be cautious. First and foremost: A detailed, written, partnership legal agreement. One of the key reasons for this is also a disadvantage: All members of a partnership are personally liable for business debts and liabilities.
But those who’ve successfully navigated the partnership landscape say that the many advantages outweigh most, if not all, of the disadvantages and can strengthen a business’s overall health and bottom line. A few reasons why:
- Differing strengths and experience. Partners’ unique backgrounds automatically supplement each other’s skills.
- Diverse opinions. How many decisions could be better, mistakes avoided, with a partner’s input? Working through the process with someone else, given that there’s honesty and feedback, often results in stronger solutions than those concocted solo.
- Strength in numbers. Facing setbacks can be less formidable with a partner. Likewise, combining resources can open up new opportunities. But know yourself. Whether flying solo is exhilarating or one is the loneliest number is highly individual.
- Partnerships attract partners. At key junctures of development and growth, a partner can usher in new energy, a sharper competitive edge and better odds of success. Having a partnership also makes it easier to keep the door open to future partners.
Look to the many resources available if you’re considering a partnership, including professional legal and financial counsel. A good place to start researching is the wsj.com small business guide, How to Start a Business with a Partner, whether you’re starting up with a partner or thinking about bringing a partner into an existing business. A key takeaway: No detail is too small to be explored and spelled out upfront. And everyone involved must agree to total transparency, including in expectations, goals and values. Three guidelines would seem to be non-negotiable for any partnership:
- Don’t skimp on the time and effort needed to learn everything about your potential partner, both personally and professionally.
- Don’t go forward without having an attorney and accountant prepare a written partnership agreement.
- Make sure there’s a detailed exit plan for all partners in the agreement.
If you think that these guidelines sound more like getting married than forming a partnership, actually, they apply to both. A lot terms associated with business partnerships are the same or similar to descriptions of relationships, marriage and divorce. And both require many of the same skills and attributes, like patience, listening and respect.
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