Commonly, when setting up a small business with one or more
people, your best option is to form a partnership. In a partnership, the
partners share everything from the decisions to the costs to the bottom
line -- losses and (hopefully) profits. The most integral part in any
business is having clearly-defined goals and priorities, and the means
to achieve said goals. A partnership is a good concept if, for instance,
you lack capital and you know somebody with the money to invest.
Of course, when choosing your partner or partners, you must keep in mind that no matter how well you think you know somebody, you can never truly know them until you've worked with them. One of the common causes for small business failure is disagreements between partners. The partners can no longer agree on basic aims and methods, and find they can no longer work together.
To circumvent such problems in a small business, you can form an informal partnership or limited partnership, which would allow partners to pursue goals and make decisions without the consent of the other partners. Partners can, for instance, take on binding contracts without needing approval or input from the other partners. Of course, in taking this approach, the best method for running a limited partnership small business is to have a solicitor draw up an agreement outlining how the business would run.
Such an agreement should be thorough in both thought (or concept, if you prefer) and written detail, and should address everything about the operation of the small business -- who is responsible for each specific aspect, how investing and financing will be governed, how profits are split, and the decisions that require joint approval and what can be decided upon individually. In planning out and drawing up such a detailed partnership agreement, all partners will understand how the business will operate and what their responsibilities, which should help avoid disputes down the line. In a regular partnership, differences in opinion are likely to surface quickly before a final plan is drawn up -- these differences are very important to address in a partnership.
In a regular partnership, all partners are liable for EVERYTHING in a small business, most importantly being finance and debt. Each partner is personally liable for occurred debt, meaning that each person may have to sell their possessions or homes just to make up for the small business's debt. That also means that if one person can't pay the debt -- or even disappears without paying the debt -- the rest of the partners must pay the remaining bill.
However, you have the option of limited personal responsibility between partners over the business debts by setting up a limited liability partnership. In a limited liability partnership, financial liability is limited to the amount of money each partner invested at the outset, and only to personal guarantees each member gave should they borrow money for the business. Keep in mind, however, that a limited liability partnership is a bit more complicated and a little more expensive to form, and you will need the help of a lawyer or agent who forms companies in order to set up such a partnership. If you wish to pursue a limited partnership for your small business, or if you're interested to learn more, your local SBA can give you further information and advice in forming such a partnership.
Of course, when choosing your partner or partners, you must keep in mind that no matter how well you think you know somebody, you can never truly know them until you've worked with them. One of the common causes for small business failure is disagreements between partners. The partners can no longer agree on basic aims and methods, and find they can no longer work together.
To circumvent such problems in a small business, you can form an informal partnership or limited partnership, which would allow partners to pursue goals and make decisions without the consent of the other partners. Partners can, for instance, take on binding contracts without needing approval or input from the other partners. Of course, in taking this approach, the best method for running a limited partnership small business is to have a solicitor draw up an agreement outlining how the business would run.
Such an agreement should be thorough in both thought (or concept, if you prefer) and written detail, and should address everything about the operation of the small business -- who is responsible for each specific aspect, how investing and financing will be governed, how profits are split, and the decisions that require joint approval and what can be decided upon individually. In planning out and drawing up such a detailed partnership agreement, all partners will understand how the business will operate and what their responsibilities, which should help avoid disputes down the line. In a regular partnership, differences in opinion are likely to surface quickly before a final plan is drawn up -- these differences are very important to address in a partnership.
In a regular partnership, all partners are liable for EVERYTHING in a small business, most importantly being finance and debt. Each partner is personally liable for occurred debt, meaning that each person may have to sell their possessions or homes just to make up for the small business's debt. That also means that if one person can't pay the debt -- or even disappears without paying the debt -- the rest of the partners must pay the remaining bill.
However, you have the option of limited personal responsibility between partners over the business debts by setting up a limited liability partnership. In a limited liability partnership, financial liability is limited to the amount of money each partner invested at the outset, and only to personal guarantees each member gave should they borrow money for the business. Keep in mind, however, that a limited liability partnership is a bit more complicated and a little more expensive to form, and you will need the help of a lawyer or agent who forms companies in order to set up such a partnership. If you wish to pursue a limited partnership for your small business, or if you're interested to learn more, your local SBA can give you further information and advice in forming such a partnership.
John is a developer, investor and engineer and has been writing
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