Forming a business partnership is crucial for any entrepreneur, but you should not be in any hurry while taking this decision. A partner can be the reason for the success or the failure of your business.
A business partnership comes with a lot of advantages. It allows you to share resources with the person who has the potential skillsets you do not possess. A business partnership should be built on mutual trust, shared values and common goals. Therefore, if you are considering a business partnership, you need to be very careful and consider the points discussed below.
Sharing similar values is essential for a good business partnership. People have short-term and long-term values, and you need to check them when you find partners. This does not conclude you should agree on every decision your partner makes. However, too many disagreements are not healthy for any business.
Business partnerships are like marriages where you will require shared values and the ability to communicate with each other to run the business efficiently through all your ups and downs. The motto should be the success of your business, keeping all differences aside. However, if disagreements start affecting your business, it is better not to be in such a partnership.
A lot of work is required to run a business effectively. Therefore, both partners must outline their roles and responsibilities to avoid any conflict in the future. It would be great if you both could write down your job description similar to what you would do in any job.
How much time will you both devote to the work individually? What all tasks you are going to look after? How your contribution to the business will be calculated? Whether you discuss every job before initiating it, even if it is not in your role? Also, make sure you have mentioned the reportings of your subordinates.
Moreover, it is necessary to mention your contributions in terms of time, money and responsibilities. Keeping every work and expectation clear from the beginning can help you avoid disagreements later.
Whatever is your business, your goals remain the same – generating profit. Therefore, you need to define how you plan to manage your business finances. Though it might not be a very comfortable discussion, it is crucial to talk through your ideas about money from the start.
Here are a few things that you should consider talking about:-
Discuss all doubts and confusion and take everything in writing. Then, ensure you have signed a partnership agreement with all terms and conditions mentioned.
There are three main types of legal partnerships: a general partnership, a limited partnership and a limited liability partnership.
A general partnership is easier to establish. You will not require to file with the state. Also, there is no continuous fee structure. However, this partnership does not provide enough liability protection to both partners.
In the case of a limited partnership, a minimum of one partner has unlimited liability, and the other partner has limited liability. Therefore, their personal assets cannot be bound to the business. This partnership is preferable when both partners have different roles and responsibilities.
A limited liability partnership restricts both partners’ financial accountability to the business. In addition, this partnership provides maximum security to both partners.
However good a relationship you maintain with your partner; rarely does any business partnership last forever. So, when you decide to dissolve your partnership, emotions will run high. Therefore, make sure you have discussed in the beginning how you will handle partnership dissolution.
If one partner decides to leave, what will be the process, resources and engagement business, and how will they be compensated? And many such questions. And, if you both decide to close the business and sell the assets, how will you divide?
This will help you part amicably, which is best for the business.
Last but not least, even if you both are best of friends and agree on everything, do not leave your terms and conditions on a verbal agreement. We would recommend you consult a business setup consultant who is experienced in the legal formalities of Dubai (UAE).
An experienced consultant of business setup can help you draft an agreement that both parties understand and agree to. You may find it tiring; therefore, this small step can remove all your worries and challenges associated with business partnerships.
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