Partnerships are very common feature in the business world and they go along way in fostering a sense of business credibility. Part of your business strategy should be to associate with like-minded professionals who bring unique qualities to further the aims and the scope of your business. In this piece, we look at how to set up partnerships.
It’s imperative for the success of any start-up that all the partners involved are cut from the same cloth. There is nothing wrong with people bringing different qualities and characteristics to the business (indeed, this is generally viewed as a good thing!). However, all involved must have the same fundamentals to establish a workable business culture. Anything less would reveal a chink in your business’ armour and could lead to disputes further down the line. Align yourself with partners who share your vision and values. Given that you and all your partners will be working together towards a common goal, any start-up should ensure that the right group of people are in place from the off to promote stability and longevity.
Of equal importance (and alluded to above) is the fact that the qualities of each partner balance and complement that of others engaged in the partnership. We all grow as individuals by learning from each other and your start-up will grow through its partners bringing different ideas and expertise to the business. This umbrella approach allows the business to draw from a wider pool of knowledge and fosters robust dialogue, effective collaboration and creates a forum for growth.
How to set up partnerships: The practical and the legal
As the dimensions and operations of your start-up expand, the likelihood of enlisting the expertise of your business partners will be crucial. There will no doubt be some things that fall within the remit of a particular partner, as no one person can oversee every minute detail. The best start-ups will allocate roles according to strengths and experience of partners, and will pencil in regular meetings to discuss both the general and specific goings-on of the business.
If you have chosen your partners wisely then you will have faith that their side of the operation will go smoothly but to facilitate this collaboration make sure that all partners are reading from the same legal songsheet. Set yourself on a firm grounding by creating a well-drafted partnership agreement, detailing each partner’s rights and duties to co-partners and to the business. This will let each partner know what the stakes are and will promote both an individual and collective sense of responsibility towards the business.
As to the legal structure of your business, you and your partners have free reign to choose the most viable model for your business. The types of partnership can range from:
- operating as an ‘ordinary’ partnership;
- incorporating the business as a limited company; and
- using the limited liability partnership model.
An ‘ordinary’ partnership is quite straightforward and flexible: it has no separate legal existence from the partners themselves. All partners share jointly as to liability and business debts can be paid off from a partner’s personal assets.
In limited companies, as the name suggests, a partner’s liability for business debts is limited to the amount of their investment in the business. The business has its own legal existence which goes some way in offering partners protection in this arrangement.
The LLP model is very common, offering the limited liability that limited company shareholders enjoy and the tax benefits and flexibility of partnerships.
You should choose the structure that best matches the needs of your business and is suited to the partnership you have established.
Advantages of partnerships
- Better prospects of gaining notoriety: with a number of partners involved in the operations, your business has wider scope for marketing its services.
- Greater availability of capital: partners driving different parts of the business allow for more streams of revenue.
- Increased capacity for borrowing and investments: – investors look more favourably on startups which are established as partnerships
The future of your business
Partnerships can work notably well for start-ups and a solid partnership sows the seeds for future development and earning potential. Of course trust and reliance on fellow partners in their roles is key to the success of any business. If your start-up has rooted a well-founded partnership and everyone contributes to the business with equal energy and zeal, you are on the right track to have a business that will flourish for the years to come.
This article was provided by Linkilaw.
Further reading on how to set up partnerships
