Being an entrepreneur doesn’t always mean you fly solo like Mark Zuckerberg when starting a business. Many entrepreneurs like to have business partners or co-founders. Sometimes two minds are better than one, and many people enjoy working as a team versus themselves. But when having a business partner, you want to make sure you have the right business partner. This is because many business partnerships can fail if not executed properly. In fact, “as many as 50 percent of business partnerships fail within the first 2 to 3 years.” One of the reasons being that each partner has different values.
So you have to make sure each partner is on the same page. What sets apart a good versus a bad business partner is not rocket science. A good business partner contains skills and assets that complement and that additionally support your own. A bad business partner is one that is “not solution-oriented, they have financial ‘skeletons in the closet,’ they won’t sign a partnership agreement, and they don’t communicate.” Having a strategic business partner is also key, and it will benefit your business in the long run. You have to do your homework and research at the end of the day and shouldn’t settle or rush into a business partnership. You want to make sure that all loose ends are handled properly and that you and your business partner agree on things and discover what each other’s weaknesses and strengths are. For example, do you both want a general partnership? What skills does each partner bring to the table?
What does it mean to be a business partner?
So what does it mean to be a business partner exactly? “A business partnership is a way of organizing an owned and sometimes run the company by two or more people or entities. The partners share in the profits or losses.” A business partnership relationship that is considered legal is usually developed through a written agreement amongst two or more businesses or people. The people involved in the business (the business partners) finance their money in the company, and each person gains from any profits and cares for any downfalls. It is called a partnership for a reason, meaning both partners benefit from gains. Still, they also have to take responsibility for losses in the business, depending on the type of partnership you are in and what has been agreed upon. This is why you need to have a strategic partner, as well.
If you plan to start a business with someone, you want to avoid your startup failing, and there are many reasons why startups fail. According to Statista, it provides the image below of why many startups fail.
Types of Partnerships
When getting into a business partnership with someone or by yourself, it is important to know that there are different types of business partnerships that you can get into. It is also important to establish with your business partner what type of partnership you both are in or want to be in a partnership by yourself. You must establish your type of business structure as this is essential. These are the four types of partnerships, as outlined in the image above:
A general partnership is a corporation owned by two or more persons who, as partners or co-owners, agree to manage the firm. Each partner has an equal share of gains and losses unless otherwise agreed upon. Partnership arrangements play a significant role in general partnerships that do not divide responsibilities and shares equally.
Limited partnerships are more organized and have both general and restricted partnerships than general partnerships. You need at least one general partner and one limited partner to begin a restricted partnership. So, what’s the distinction between a limited partner and a general partner? Well, a limited partner is … limited. Limited partners only act as the partnership’s investors. A limited partner usually does not have decision-making powers. They get possession, but they do not have as many risks and obligations.
Limited Liability Partnership
A limited liability partnership, or LLP, is a form of partnership where members are not held liable individually for the company’s debts or other partners’ acts. If someone takes legal action against your company with an LLP, you usually can’t lose your personal assets. But, if they individually do anything wrong, partners may be held accountable.
There can be two or more owners of an LLC relationship, which is known as members. Limited liability corporations with many members are referred to as partnerships with multi-member LLCs or LLCs. Under the hands of an LLC partnership, the personal assets of members are safeguarded. In most circumstances, participants can’t be sued over the actions or deficits of the group. But, members can be held liable for the actions of other members, though.
How to Find a Business Partner
Finding a business partner is not all that different from finding love. Like how there are apps and websites for dating, there is the same for finding a business partner. You can make an account, download, and join Trends today! Trends allows you to “Understand upcoming market trends, receive premium weekly reports, access databases of research, and network with the smartest people that they know.” With Trends, you can “Connect with an unprecedented community. Workshop your ideas, collaborate on opportunities, and learn from experts in every industry.” Trends have been identified and highlighted as “The most powerful business peer group.”
Some other ways that you can also find business partners are as follows:
You can check out a bunch of these different websites that help entrepreneurs find their ideal co-founders and also help you with finding the business partner that you want with the right skills:
- CoFoundersLab: Matchmaking for Entrepreneurs
- Founder2be: Find a co-founder for your startup
- techVenture’s Cofounder Network
- Tech cofounder
Tips on How to Make a Business Partnership Work
If you are aiming for a business partnership, there are some tips you need to follow for it to become successful. Here are some tips to follow:
Share the same values: you both need to share the same values. This means that you both have to share the same goals, aspirations, and ideas. If you both aren’t on the same page, then the partnership isn’t working out. Maybe you envision doing the business full time while your partner wants to do it part-time. If this is the case, you have to communicate and discuss things first before signing a partnership.
Share complementary skills: Another good tip and trait you want in a business partner is to have complementary skills. This means that you both want to portray different strengths. This is important because everyone has strengths and weaknesses. You want your partner to have strengths in the skills that you may not be as successful in to outweigh the balance.
Discuss track record: When you have a business partner, it doesn’t mean that you have to have known them for a long time, but it does require that you both sit down and discuss your track record. Discuss what you have done in the past, what worked well for you, and what didn’t.
Outline each other’s goals and responsibilities: It is important that when you are getting into a business partnership that you discuss what each other’s goals and responsibilities are clear. This allows for proper organization and less confusion. Each partner should have a defined job title and set of duties. Doing this also eliminates any future disagreements that could come up.
Put things in writing: It is important to put things in writing when setting up a business with a partner. Even if the person is someone you have known for a long time and trust, you still must draw up legal documents. Some things you may need to put in writing are each other’s responsibilities and the business’s structure. Also, for example, if one partner wants to leave the company, you need to outline in writing what steps and decisions will be taken.