In the world of business, there are times being a sole proprietor can be draining financially and even emotionally. The need to offset this burden becomes crucial.
Partnership according to Investopedia is a formal arrangement by two or more parties to manage and operate a business and share its profits. In a partnership business, all partners share liabilities and profits equally, while in others, partners have limited liability. There also is the so-called “silent partner,” in which one party is not involved in the day-to-day operations of the business.
The introduction of partnership into the business was an innovation against the pitfall of a sole proprietor. History gives account of the first of the first partnership as one between Francesco di Marco Datini and Florence, in 1383.
It is worthy to note that some business ventures can require a gigantic capital to start up and most times, cannot be handled by one individual.
Humans are social beings and we thrive on social interaction and exchange. In other to survive, we need to work together. Take for instance, Mr A wants to start a business, and cannot foot the bills, he calls his friend Mr B and tells him about his idea. Mr B likes the idea and he decides to assist Mr A but with the sole aim of making profit. In so doing, the business is sustained and they both have ownership.
There are four types of business partnership
- General Partnership
- Limited Partnership
- Limited Liability Partnership
- Limited Liability Limited Partnership
A General Partnership is the earliest and most basic type of partnership. Here, individuals come together to share in the profit and loss of the business together. An agreement is binding on all partners, to regulate their activities.
Limited Partnership, is a formal business, and requires approval by the state. Amongst the partners, there are delegated responsibilities. They have at least one general accomplice who is completely answerable for the business and at least one restricted partner who gives cash yet does not effectively deal with the business. A sort of behind the scene partner, a silent partner who is financially invested in the business but is not active in any managerial role.
In our environment, we experience such whereby a wealthy person is interested in a business idea, constantly funds it but the originator of the idea, does the day to day running of the business.
Limited Liability Partnership shares certain similarities with the general partnership but differ on the grounds that it restricts their obligation for one another’s activities. As regards the business, partners share responsibilities and liabilities but on the off chance that a partner commits a blunder or an oversight, other partners are not liable for that.
Limited Liability Limited Partnership is by far recent and a modern addition. It shares certain characteristics with the Limited Partnership. For this kind of partnership, the liabilities of each member is limited and protected.
Having a partner is a good idea but having a bad partner brings troubles to your doorstep. Before entering into a partnership, I suggest these guidelines:
- The first thing is to decide the type of partnership you intend to have.
- Before choosing, research. Don’t choose a partner based on looks. Appearance can be deceptive. Make sure your partner exhibits the attributes and goals of your business.
- Ensure you have an identity together. A Name for the business duly registered with other necessary documentations.
- Money, a very important aspect and the root of all evil as they say. To maintain a strategic distance from monetary issues, open a bank account and pick the type suitable for operations
- Make sure every decision made for business benefit is a consensus. It is a partnership not a one man property.
Adhere to these few guidelines and succeed. There should be mutual respect for and among partners and it is essential to sign agreement documents. A partnership is the solution to the problems of a sole proprietor.
Now, the burden is shared and we all know, two heads are better than one. The magnificence of a partnership is felt for the purpose of problem-solving and critical thinking. In contrast to the sole proprietor, partners can conceptualize, approach information and experiences from one another, and settle on a great choice. The burden is shared which is sometimes the doom of a sole proprietor.