Are you thinking of starting a business partnership? Are there things that you should consider before deciding to partner up?
A business partnership is where two businesses agree to combine their resources and talents to create new ventures or services. This could mean merging forces or pooling resources for a specific goal.
There are various ways through which you can enter into a partnership agreement. One way is having a joint venture agreement (JVA). This would involve both parties forming a company together and then selling off shares equally. Another option is a non-disclosure agreement (NDA).
This involves the parties agreeing not to disclose certain information about the project until its completion. Other options include signing an operating agreement, which sets out the terms under which the two parties will run the operation.
However, these agreements can only take effect after the parties sign them. In case of disputes or disagreements, litigation can also be pursued. If you wish to form a partnership, it is advisable to seek legal counsel from an experienced attorney. This can provide valuable insights to navigate the complex waters.
Pros of a Business Partnership
1. The benefits of partnerships are many. First, they allow companies of different sizes to work together efficiently and effectively. It allows them to learn from one another’s strengths and weaknesses.
2. By combining your resources with those of other partners, you can gain access to new markets, expand your customer base, and increase profits by cutting costs. You could even find an idea for a brand-new product that has never been thought of before!
3. They allow you to leverage each other’s expertise and establish networks that will help you in future endeavors.
4. Partnerships can also act as a great stepping stone towards future partnerships. Once established, you have more chances of entering into further partnerships. This offers greater opportunities than working alone
Cons of a Business Partnership
1. When you set up a partnership, the people with who you are partnering become shareholders/partners too. This means that if anything goes wrong, no matter how small, they could potentially incur losses.
2. Partnering with someone might make it difficult to remain independent. As a result, it may be tough to steer clear of being forced into making decisions that may compromise your individual interests.
3. There are usually contracts associated with setting up partnerships. These are known as general partnership agreements (GPAs) or limited liability partnership agreements (LLPs), depending upon whether you want to offer equity or just share revenues and expenses.
4. Often, when you’re dealing with a smaller business, you need to deal directly with the owner.
Is it a Good Idea to Get into Partnership?
While partnering is very beneficial, it has some risks associated with it as well. It might become difficult to maintain the goals and objectives if one of the parties becomes dominant over the other. This dominance may lead to conflict and arguments which in turn may result in bad publicity. Also, without proper documentation, you can never rule out the possibility of being sued by one party against another.