Starting A Business With A Partner

Business Partnerships

Yesterday, we took a look at the simplest way to start a business – a self-proprietorship. Today we discuss a partnership, which is the simplest way to start a business with other people. Even though it is an easy way to set up your business, it may not be the best way to do so.

A partnership exists when two or more people come together to start a business. There are many reasons why a business owner might consider a partner. The most obvious one is that a partner brings in additional cash needed to start and rung the business. Sometimes, however, a partner brings in additional expertise that is necessary to start and run that business. ideally, the partners should complement each other, and bring in different and complementary strengths and abilities to the business.

Partnerships are easy to start, even though they are more complex than sole proprietorships. All it takes is a simple agreement which can be handshake agreement, and that’s it you are in business. If you are serious about growing your business, then you might want more than a simple handshake to base your business upon. A written agreement is best when dealing with a potential partner,m and remember the old adage – not written, not said. Make sure you document everything in detail if you plan on doing business as a partnership.

As with a sole proprietorship, there is no protection from liabilities in case something goes wring. Both partners would be fully liable in case of a lawsuit, and would be in danger of losing everything as a result of a lawsuit. That one reason alone is enough to dissuade anyone from considering this form of doing business. Each business owner would be liable for the actions of the partner, and that is one serious disadvantage to have when running a business.

Two valuable resources for business owners and entrepreneurs considering a partnership as a way of structuring their business are David Gage’s The Partnership Charter: How To Start Out Right With Your New Business Partnership (or Fix The One You’re In), a great guide to finding and getting along with a business partner, and Karen Burke‘s Federal Income Taxation of Partners and Partnerships in a Nutshell, a book that looks at the all important tax-implications of structuring your business as a partnership.

A partnership can be a great way to to set-up your business start-up. A partner can be a great addition to you new business, but it can also be the downfall of a great business idea. Partnerships work great for some, and not so great for others. Do your research, and consider your potential partner carefully. It’ll save you a ton of headaches, and possibly a ton of money.