Business Partnerships
This is when two or more people combine to form a business unit. The maximum number of partners allowed by law is 20. Each partner receives a percentage of the return of the business, depending upon how much they invested.
As with sole traders, partners are also responsible for all the debts incurred by the business. This does not only apply to debts incurred by that partner but any partner. Take care because creditors will take your personal assets to pay off debts incurred by other partners if necessary.
When considering what format the business should take, partnerships need extra attention. One of the most fundamental issues is to get a partnership agreement. Such an agreement will force partners to think about issues such as the role each partner will perform in the business as well as a likely exit route for each partner. This can ensure that there is a mechanism for valuing each partners share of the business.
Why a partnership?
These are some of the advantages of partnerships:
- Being able to share the burden. Partnerships give mutual support, companionship, and someone to share the problems
- It can be stressful, lonely and frightening running a business alone. With someone else, you can feel like you are in it together
- Having access to more skills, knowledge and experience. Partnerships provide for a wider skill base, complementary experience and know how. For example, one technical - one Selling.
- Better, more effective decision-making. A partner will bring different perspectives on problems. If often helps being able to see different points of view
- Being able to look at problems from many angles can help to achieve better often more creative solutions: more people means more perspectives
Why shouldn't you collaborate?
Disadvantages are :
- Less autonomy that is, not being able to do your own thing and not always getting your own way
- Differences in personal aims and objectives for the firm
- People have different views about their own future which may not be compatible
- Having to win consensus often slows decision making.
- The distraction and cost of handling conflict between co-owners
- Resentment when reward is not seen as fairly matched by effort
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