6 Things You Need to Know Before Forming a Business Partnership
Forming a Business Partnership can be one of the most important steps in your business’s growth. If you have formed a business venture with someone and are now interested in how to grow it sustainably, then developing a strategic alliance can be one of the wisest moves you can make. However, if you have not yet done so, there are a few things you should take into consideration before forming a strategic alliance with someone or a company. In order to do well when forming a partnership, it is important that both partners share the same visions for their company. Here’s a list of considerations to think about when you consider the viability of developing a long term partnership:
Strategic alignment: Can the company’s visions be aligned across the two companies? Will the two companies work together to create and maintain sustainable profits? Do the profits created by the strategic business partnership to produce enough income to justify the capital investment? Both business owners should put themselves in position to financially support each other while they achieve their own personal goals.
Control of the business: Will the company’s strategic partners have the ability to manipulate or bind the business partnership agreement? This is actually a concern for all new business owners, particularly in early stages of development where capital costs and profit potential aren’t fully developed. One of the reasons that creating a business partnerships is so appealing is because the profit potential is unlimited. It is important to establish the control over the partnership by delineating an organizational lien or power of appointment that ensures neither partner will abuse their authority. These auctions, via sites such as Boat Parts are also available online.
Legal documentation: Will the implementation scheme be written into your corporate headquarters’ operating agreement? Some companies form working agreements without providing any legal documentation leading to confusion and frequent lawsuits. When you include a legal document, you are assuring your partners that the agreement is legally binding. The documentation also establishes the terms and conditions under which the partnership will operate.
Ownership: Will there be an ownership structure? In most business structures, the partners are typically owner-financers and shareowners. However, some partnerships have a different property structure where one or more partners act as co-owners and there are personal liability and corporate liability incurred by the partners individually. The best practice is to clearly spell out the ownership and personal liability in the strategic business partnership agreement.
Limited liability: Will there be a limited liability? Some partnerships incorporate as sole proprietors and the personal liability is limited to the individual partner. This is a useful choice when the business has high risk factors such as high capital or personal liability.