A strong union or partnership that starts a business is more likely to thrive than a business that goes solo. This is because a business partner may have complementary skills, customers, financial resources and other connections that blend to create a strong business. Now, unfortunately, there are also problems that can arise from working with other people. Sometimes, ideas don’t meld together and other times, arguments might rise up from little things.
The worst thing that can happen is that a partnership dissolves over time. With a lot of money on the line, it’s important that each party pay attention to the details and structure of their partnership. You need to understand what each person contributes, whether it is financing, labor, customers or other profits.
How to Structure a Partnership
When it comes to forming a partnership, your first job is to figure out who is involved in the partnership. Some partnerships involve more than two partners. Keep in mind, however, that if you have too many partners, it can become very complicated and involved. You may not be able to manage having a lot of partners, particularly at first. So, try to keep your numbers low so that you’re sure that you’re creating a mutually beneficial partnership.
When it comes to a business partner, there are two different types. There are general partnerships and limited partnerships. The general partnership does not require anything to be put in writing; however, you should always have everything in writing. In this type of relationship, you have joint and several liability. This means that each partner has liability when it comes to debts.
Limited partnerships, on the other hand, are comprised of one general partner and another limited partner. The limited partner has the name and limited personal liability. The limited partner is silent, contributes money without having and right to direct operation and is not involved in running the business.
To structure a partnership with your partner, you should do the following:
- Write a business plan
- Choose a name
- Understand your tax obligations
- Obtain federal employer identification number
- Choose a location
- Obtain licenses
- Obtain insurance
- Write the partnership agreement
When it comes to any business matter, it’s important to write down everything that you think is important and to take care of all legal matters in writing.
To structure a business with a business partner can be incredibly beneficial. It takes a lot of the stress off one person when there are others involved with a company. However, it’s important to structure the business to decrease the chances of problems later on.
