With so many different types of business structures, it can be confusing when it comes to choosing the one that’s right for you and your goals as an entrepreneur. From a sole proprietorship all the way to a corporation, each form of business has its own set of advantages and disadvantages that should be considered before diving in. That’s why, if you’re brand new to business, you should introduce yourself to business ownership by taking this online course before deciding upon the fate of your future company.
What is a Business Partnership?
One of the most common types of business is a partnership. This is a situation in which two or more individuals share ownership of the company and are the major decision makers within the organization. Each partner has the ability to oversee the many different departments within a company, as well as everything from the business’s finances and assets to its human resources, marketing, planning, and management strategy. As a result, each partner also shares the profits, or the losses, that the business incurs.
As you can probably imagine, a partnership can be a great way to run a business, as it means you won’t be the only one with all of the responsibilities on your shoulders. Instead, you can share your duties as a business owner with at least one other person who has his or her own set of skills and talents to bring to the table to make the company succeed.
But, at the same time, because you aren’t the only decision maker running the show, it can be difficult to give up some of your power and compromise on important issues that will affect the success of your business. Being on the same page, by reading blog posts like this one that give you insight into business strategies you can use, will help you and your partner do well.
The Major Advantages of Running a Partnership
A partnership is a good option for those who are just starting out or who plan on running a small business that will consist of about 20 employees or less. It’s also a good idea when you don’t need to register as a limited liability company.
Below are some of the other major advantages you can enjoy by running this type of organization.
Easy to Form, Inexpensive to Maintain
If you aren’t looking forward to the headache and stress of starting a new business, you can rest assured that a partnership is easy to form. You and your partner(s) can establish a business plan with the help of this course in order to determine where and how your business will be run, as well as who will work with you and what you’ll be providing to your customer base.
Your partnership will be formed quickly once all of the major players involved come to an agreement and sign the necessary paperwork and the partnership contract. The process is an inexpensive one, too, so you can get up and running without having to worry about spending a lot of your capital on the business formation, saving it instead for your actual startup costs.
A Varied Skill Set from Multiple Managers
Each partner within a business partnership will bring his or her own unique skills, resources, education, and experience to the mix. This means that you can use someone else’s ideas and expertise in areas that you are uncomfortable with or those that you simply would rather not deal with. For example, you might be really good with numbers, which means you can handle all of the financial matters within your organization, along with analyzing profits and losses to improve the business model as you grow. If your partner is really creative, outgoing, and full of great marketing ideas, on the other hand, he or she can work on that aspect of the business in order to inform the most people possible about what you have to offer.
When more than one manager can bring various skills to a company, it’s more likely to succeed, as long as everyone learns how to work together and respect each other’s talents and limitations. Rather than having the burden of running every aspect of a new business on one person, a partnership shares this responsibility, making it easier to succeed.
If you and your partners decide to manage all of the areas of your organization yourselves, you can greatly reduce the cost of doing business because you won’t need to hire as many managers, if any at all. When you consider the costs associated with hiring multiple managers and keeping them on as part of your workforce by providing them with high salaries and reliable benefits, you’ll quickly realize that these costs can be dramatically reduced and you can use that money elsewhere to make your business thrive.
Pooling Resources and Sharing Financial Responsibility
Starting a business requires the acquisition of credit and startup capital that will get it up and running until profits start coming in. Yet another advantage to operating as a partnership is the ability to pool everyone’s resources together so that the company can have more assets and more funding to hit the ground running. Once you and your partners define your business’s vision, mission, and ultimate goals, you can work together to acquire all of the capital you need to make those objectives a reality.
Also, once you’ve established your company, you and your partner(s) will share financial responsibility as well, which means there will be more than one set of eyes on the accounting records at all times in order to ensure that things are running smoothly and according to plan.
Flexibility and Speed with Decision Making
Larger businesses have to deal with a lot of managers on all levels of the organization, making it difficult to finalize decisions and implement changes quickly. But because a partnership involves only a few people at the top, you can sit down and analyze how your business is doing and determine quickly where changes need to be made. This means you can cut costs wherever necessary without wasting any time, or you can add in new products and services with ease without having to ask for permission to do so. It’s simply up to you and your partner(s) to decide what’s best for your company by doing the necessary research and having the foresight to establish what ideas will work.
Private Business Affairs
A partnership gives you a lot of privacy that you don’t get with other forms of business. You aren’t required to publish your accounting records and business matters can be kept a secret between the owners of the company.
Bringing in Employees as Partners
If you and your partner(s) need more help with running your company at any point in time, you can bring on certain employees as additional partners if you wish. This means that employees who have proven themselves and care about your company can add more value and resources to the mix.
By offering partnership incentives to your employees, you’ll generate a strong workforce that’s committed to proving itself and making great things happen within your organization. In fact, companies that offer these incentives to prospective employees often find that they’re able to hire the most dedicated, highly qualified, talented, and motivated workforce. Other types of small businesses aren’t as attractive to these types of individuals, who want more than a position that makes them average employees doing menial tasks every day.
Disadvantages to Consider
Even though there are many perks that can be enjoyed by running a business as a partnership, there are also disadvantages that you should consider. First, it’s important to remember that, as a partner, you’re liable for what goes on in the organization. Just as your personal assets may be on the line when you run a business as a sole proprietor, the same holds true for a partnership when you need to pay off high amounts of debt within the company.
Owners are also held liable for their partners’ actions, which means everyone needs to be on the same page at all times and be aware of what everyone else is doing. In other words, you’re held responsible for your own actions, as well as the actions of your partners as they affect the company.
Finally, business partners need to know how to get along and respect one another, especially when disagreements arise. Each partner is a shareholder in the company and its profits, and it takes a lot of hard work to keep everyone satisfied.
If you have a great business idea but you aren’t sure how to go about making it a reality, it is time to educate yourself on what it takes to start a company. Once you know that you are ready to be a business owner, consider finding like-minded and talented individuals to be your partners so that you can share responsibility, determine the best course of action for your company, pool your resources, and make things happen quickly.