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A business partnership can be incredibly rewarding when you build something with someone else, but there are some potential pitfalls to be aware of.
A business partnership is a contract between two or more parties, offering goods and services to clients and sharing business losses and profits. Business partners pull together their resources, such as money, property, and skills. A sole proprietor (a person who owns an unincorporated business alone) can turn their business into a partnership, or partners can form a limited liability company (LLC).
Business partnerships have a lot of advantages. Then again, a partnership might not be ideal for your company. Knowing the pros and cons is best for making an informed decision. The Harding Group is here to discuss the pros and cons of a business partnership.
The Business Partnership Pros
One of the best benefits of entering into a business partnership is having a trustworthy person or business on your side. Partners support each other and have the same goals. Each party works together to make the business successful.
Here are some primary pros to consider:
- Extra knowledge: Partners are a valuable asset when running a startup business. They can bring additional knowledge by sharing their expertise and skills with the group. For example, an older partner could answer many questions that a younger, less experienced partner might have. The more you know, the higher your chances of succeeding.
- Fewer financial struggles: Finding the funds for a new business is challenging. When you have one business partner or more, it decreases the financial burden. You won’t have to foot the bill alone any longer. Your partners can provide financial support by investing in your business as a full partners or taking a more limited role.
- Additional help: It’s overwhelming to start a business. Before you even get your business off the ground, many decisions exist. A partner can assist with various business tasks. You’ll feel relieved knowing that you don’t have to do it all alone and that you can divvy up tasks.
The Business Partnership Cons
There are also some reasons why collaborating with another party or more might not be the best choice, some of which include the following:
- Relinquishing control: If you’re used to being in complete control, a business partnership might not be for you. You’ll have to share business decisions. Since disagreements are inevitable, you must have the right conflict-resolution skills to handle them. It’s best to legalize a formal operating agreement signed by all parties to resolve and reduce issues.
- Splitting the revenue: Sole proprietors are used to keeping hard-earned profits for themselves. Partners must split the revenue based on their partnership agreement, and you might find that difficult. Having a partner who can take your business to the next level might increase your profitability. Also, depending on the type of agreement you might have, you might not lose out on a lot of profit.
- Undependable partners: As mentioned before, it’s best to have a partner you can trust on your side. However, because a partnership is a joint venture, a partner might not devote all of their time to a project, becoming unreliable.
According to Forbes, some strategy to find an ideal business partner is to choose someone who:
- You genuinely like
- Shares your values
- Has a complementary set of skills
- Gives and takes
- Desires to grow and will support your growth
- Engages in proactive conflict management
- Shares your vision
- Understands that the partnership might come to an end
If you’ve learned nothing else from this blog, we hope you’ve learned that you don’t have to do everything alone. If you need help making business decisions, you can count on The Harding Group.
Trust the Professionals at the Harding Group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients.
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