The partnership is the most common form of business structure. In this a minimum of two persons combine their investments, abilities, experience, and other things to start a business. If you are willing to start a business in partnership, you can follow some steps to do that :
1- Agreement: There must be an agreement between the parties concerned. 2- Number of partners: There should be more than one person to form a partnership. 3- Business: The objective partnership formation is to carry any type of business. 4- Conduct of business: The partnership business is conducted by all the partners or any of them acting for all. 5- Entity: It has no separate entity apart from its members. it is not independent of the partners. 6- Position: One partner is an agent as well as the principal to another partner. 7- Profit Motive: The basic motive of the formation of partnership is to earn a profit. The more sales you generate the more profit you make.
I have worked in and LLP company where there were three partners who worked for the same company before starting their own company.
I would say, a partnership is a lot of risks, money wise as well as the relationship between the partner's changes over time.
Sharing the same objective is good to start with but with time if the loss vs profit margin increases, there's cash crunch, it gives rise to tension among the partners especially if you don't know your partner well.
I agree with the author saying there's less risk as the losses are split but I would still opt for a sole proprietorship as it's difficult to find someone with the same passion as yours, also one who trusts your decision and should be hardworking and supportive through the tough times.
Both sole proprietorship and partnership has its own advantages and disadvantages. But I prefer partnership would be efficient if both the partners have the same goal and objective over the company. The owners could share both profits and losses over another which would be more beneficial than single owners. The relationship between partners should be based upon mutual trusts and confidence. He must observe utmost good faith in most all dealings with his co-partners.
I would consider forming a partnership in the future, especially when launching a startup for the first time. Having a trustworthy partner can speed up the process of forming the company with additional financial backing with our joint investment and increased likelihood in obtaining loans. While a partner can strengthen the company with his/her skills, each partner is vulnerable to being burdened by the other with debt and/or poor business decisions. When seeking a partner, I would examine the person’s track record and history to see if he/she is trustworthy, honest, and has a good work ethic and strong sense of responsibility. While our objectives and morals should align, it would also be ideal if the partner was stronger in areas that I lacked expertise in. I would also consult others to receive their opinions of the potential partner. Even after selecting a good partner, a rift in our relationship can form later on from hitting rough patches and failures, so it is important to set guidelines. Prior to forming the partnership, agreements will be written out in legal documents. They will clearly detail the roles and responsibilities of each partner, set boundaries, and outline the conditions, procedure and dividends if the partnership dissolved.
I agree with the fact that sole partnership and partnership are very similar. Depending on the business structure I will choose the partner. Choosing a partner depends on various factors. First thing do not mix personal and professional relations. It may affect the business adversely. I will look for the skills, knowledge and experience in my partner for the specific business. Trust in the main pillar of any kind of relationship. It applies in partnership also. According to me a financially and emotionally stable resourceful person is the best fit for a partnership.
First of all, I totally agree with you, because it is relatively easy for a partnership to spread the pressure of finance and risk equally among each partner, as opposed to a sole proprietorship to withstand all the pressures and risks.
Secondly, I would like to consider becoming a partner in the future. Because the pressure is too great and the risk is very high for most people as a sole proprietorship. If something unexpected happens, it will cause irreparable impact. I hope that my future partners will have a sense of responsibility and courage to face the dilemma, because there will always be various problems in the operation of the company at the beginning. Once we decide to run a company, then I hope that my partner is not a "quiter", it is very important that my partnership need to face the problem with me together.
I am currently, in a partnership with one of my close friends back home. We both share the same passion and also are very interested in building our own establishment one day. He is in charge of the management and the business end of things since that's where he has experiences and I am in charge of the technology side since I am currently pursuing my Ph.D. in engineering. I think it's important that you share the same passion and at the same time are willing to work hard for it. Also, setting expectations and requirements early on is very important that way it minimizes the future incidents which regardless of what you will do it will develop. Also, knowing each of your partners well including personal experiences, in my opinion, is a huge advantage when it comes to especially small companies. This way you are able to have a deeper understanding of where someone is coming from. Also, it builds trust as well which is one of the most crucial things when it comes to running a company.
I remember reading once that businesses that are partnerships perform better than sole-proprietorships because the partners push each other to do well. I think that when it comes down to it, a partnership is better but only if the two partners can work extremely well together. Dr.Simon compares a partnership to a marriage in his lecture and I don't think this comparison should be overlooked. The institution of a partnership is very likely to be as involved (if not sometimes more involved) as marriage between two partners.
If I wanted to start a business with a guy I know, I can still start a sole proprietorship and make him an employee of mine, and that might be a better way to protect myself if I don't know this guy or if I'm not too sure about him. After all, if I'm starting a partnership with the wrong person it can get very ugly legally and financially.
That being said, I want to reiterate that I believe to determine whether a sole proprietorship or partnership is better depends on the two people and the kind of business that they do.
Personally, depending on the business idea, I would be open to the possibility of doing a partnership in the future. Therefore in terms of characteristics, I believe honesty is an important characteristic to look for in a business partner. This trait is one that should be extended not only between the relations of the individual business partners, but also in the manner that partner conducts business and interacts with customers. In general, the overall approach of the partner towards the business should be to operate with good faith and honesty. Another desirable trait for a business partner would be someone who is persistent and continues to work to the best of their ability during both the successful and unsuccessful times. Overall, I believe to ensure a successful partnership all the stakeholders should meet and discuss the responsibilities each person would be in charge of and which decision or factors would be up for discussion. Therefore abiding by the defined designations and protocols is an important factor each business partner should possess to prevent any clashes that can affect the business.
I would definitely consider doing a partnership in the future because it will most definitely be easier financially and less time-consuming. I believe partnerships give a company a sense of diversification to the different abilities of each of the partners involved. This could benefit the company substantially compared to just having one individual running the company or just a bunch of investors. If I were looking for a partner, I would looking for traits such as hard-working, dedicated, passionate, financially stable, morally inclined, and knowledgeable in the field of business we are pursuing. I believe all of these traits will form the perfect business partner which will ultimately build a great company.
In my personal opinion, partnerships and sole proprietorship are very similar but with lower risk when investing due to the split of initial costs for partnerships. Partnership sounds amazing for whenever two people share the same objectives and are willing to work hard in order to achieve it. Even though you run less risk from a financial point of view, there is still a lot of risk when choosing the correct partner. Would you consider doing a partnership in the future? If so, what characteristics would you prefer for your partner?
I personally would not consider doing a partnership in the future, as it can be extremely risky. Choosing the right partner is very tricky, since you could think you and your partner are on the same page and aligned with the same vision for the company, but once you get into the weeds and get the company up and running, things can change. At that point, if you don't like the decisions they're making, there's not much you can do about it since one of you wouldn't have more of a say than the other. Dr. Simon also mentioned it can be extremely difficult to get out of a partnership contract, so you may be stuck in the partnership for a very long time.
If I were to choose between the two, I would go with partnership. The advantages and disadvantages in both are very similar, but having a partner to run the business with you is of a great help. The responsibilities can be a bit heavy on one person to handle the business and sometimes that owner ends up losing the business. Many people turn their business into partnership when they reach a point where their profits are not covering the debts, and so they need a partner to become part of the business to rescue the company from the debts. Partnerships are not always successful because of disagreements or the fact that they can be untruthful in the business. One person might be taking advantage of the company or the other partner and end up robbing the profits. We hear about these stories all the time. That is why, it is necessary to choose the right person to run the business, not ruin it. The profits are shared, but the work is also shared, and ideas to improve the business are shared. When one person is ill, the other person can take their place to keep the business moving and profits increasing. Partnerships don't always have to end up the bad way, in fact some end up building strong bonds and lifetime relationships.
It is true that the initial cost of investment with a partnership will be split between the partners; however, I would not consider this a lower risk for a few different reasons. First, just as you are splitting the cost initially, you are also splitting either the profit, or in a less fortunate case, the loss. In addition, either partner has the ability to act as the sole owner in the sense that if they were to sign anything, both partners have to adhere to that contract. This is why it is very important to have similar objectives and goals for the company when it comes to partners. I have personally had the opportunity to be in a partnership as a co-inventor on intellectual property, and although not the same as a company, wow did I learn a lot in regard to how difficult it is to step away from this, and some key characteristics I will be sure to look out if I were to choose partners in the future . In my opinion, transparency and communication, along with a fair share of the profit in comparison to contribution are the most critical components to a successful partnership. With a partnership, the profit does not have to be split 50/50; however, how it is split needs to be unanimously agreed upon. If not, and speaking from experience, it can get pretty sticky when it comes to legality of who really owns what, and who contributed how many hours of work. Jumping into a partnership too quickly is a recipe for disaster and I would therefore recommend a this sort of deal be made between people that know each other fairly well. This is not to say on a personal level, but a good business relationship where time has been spent getting to know if this persons' company values align with your own should be a priority.
Since the partnership corporation can pursue my personal finance, I personally think it is not save at all even if my partner were one of family members. Also, finding someone I trusted today is easy, but I can't say that this person is trusted tomorrow because no one knows the future. The partnership is worse than unhappy marriage. For that, I prefer Sole Proprietorship, so the business depends the effort and money that I spend on it.
Given the current situation we are in with the interest rates as low as 2.5% for the purchase of new homes, this subject could not be more relevant. At this time we are able to purchase a home with as little as 3.5%; now I am not saying it is a sound investment, but an income property that can rent 2-3 apartments could be profitable. From reading the thread I see that many of you opted for sharing the load in a new venture, which makes sense because its less invested money for possibly more value. Although I see the positive side of doing this, I would prefer to start a business on my own; whether is an investment home or a new medical device. I think the freedom that you get from being the sole proprietor of the business surpasses the increased risk. I will have to say that I would opt to create an LLC and minimize the risk of the investment. Moreover, I think partnerships work best when there are more than one need for the business and the second person will fulfill that need, but if it is just risk, then single ownership would be better in my opinion.
