Finding The Right Business Partner

If you are thinking of setting up a business of your own, one of the main considerations is deciding whether you wish to set up as a partnership or as a limited company. People often prefer to set up a partnership opposed to a limited company – why? It is easier and cheaper to set up and you don’t have to go through the process of registration or filing returns at Companies House.

However, there are still many things to consider before setting up a partnership. One of the main issues that people seem to get wrong in setting up a partnership is choosing the right partner or partners. Going into business with the wrong person will not only jeopardise your business but will also mean your personal finances will also be at risk.

These are our tips on how you can choose a business partner who will be right for both your business and yourself.

Find Someone Who Shares Your Values But Is Not The Same As You

It is natural that you should want to go into a partnership with someone who has the same goals and shares the same values as you – choosing someone who does not could mean trouble from the very beginning. Sharing the same business goals is essential to partnership success otherwise you will both be working towards different goals.

However, it also not wise to choose a partner with exactly the same skill set as you, as a partnership should be comprised of people with the same goals but with different skills that complement each other. A good combination in a partnership, for example, would be to have one partner who has considerable experience and knowledge of the service or product they are selling and to have another partner who has experience with budgeting and accounts. A partnership is about combining complimentary skills and talents together to get the best possible partnership.

Always Ask Questions Before Entering A Partnership – No Matter How Awkward

Regardless of whether you have known your potential business partner for years, or even if you have only just met them, there are still many questions that you must ask before considering going into business with anyone. Whilst some questions may seem somewhat awkward and perhaps an invasion of their privacy, you must get the answers to these questions before you agree on anything. Such issues that may prove hard to bring up are questions about your potential business partner’s financial situation and credit rating. If you do not ask such questions beforehand and your partner does have a bad credit rating then you may find that you have trouble later when applying for a loan.

Pick a partner that you can talk to

Following on from the paragraph above about asking questions, you need to make sure you pick someone who you feel comfortable in discussing difficult issues with. In our experience, one of the most common and yet easily avoidable. Reasons for dissolving a partnership is that there was a lack of internal communication. Picking someone to go into business with, with whom you don’t feel comfortable talking to about difficult issues, is a recipe for disaster.

Choose a Partner That You Can Actually Trust

The most important aspect in choosing a partner is that you must be able to trust them as they will be involved intimately with the business, your reputation and even with your finances. Even if you do trust your partner it is always a good idea to have a written partnership agreement. Although this is not a legal requirement for forming a partnership, it can prove very useful if there are difficulties later on.

If you have any queries about setting up, or dissolving a partnership – or any other type of business – sure you get the right advice from a specialist business lawyer.

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What Can Cause A Business Partnership Dispute

It has to be said, there can be many advantages to a business partnership – when it works. For example, costs, responsibilities, and risks can all be shared. The partners can work with each other’s strengths and weaknesses and motivate each other. However, there are many reasons why partnerships don’t work out, and a business partnership dispute can arise. This article looks at the most frequent ones.

  • Shared profits but unshared workloads – There are numerous examples of businesses where one partner has put in the vast majority of the money, and the other partner does the vast majority of the work – not 50:50 partnerships by any definition. As the business takes off, the partner who is doing all of the work continues to work harder, but their percentage stays the same. They can eventually become very disgruntled with their (usually) low percentage share in the company, and a business partnership dispute can arise.
  • Shared decisions – An effective partnership is one where the two partners are interdependent. Most businesses have several important decisions that need to be made on a frequent basis. If one partner does not agree with the other’s decision, especially if the decision will change the course of the business, this may be another cause of a partnership dispute.
  • Personality Clashes – The partners may realise that they don’t get on both in and out of business. This can affect their relationships and the outcomes of meetings and decisions. They may go out of their way not to work together. This may make the partners and hence the business less productive.
  • Different Visions for the business – One partner may want to build the business up slowly, whereas the other has a very aggressive strategy for growth. It is important that both partners share the same vision for the business, as that makes them more likely to co-operate on the day-to-day decisions that need to be made. Having different visions for the business can negatively affect how it is run, and decrease productivity as it will take much longer to reach a decision that both partners are happy with.
  • Breaking trust – If one partner does something that is considered “shady” or illegal, particularly behind the other partner’s back, this is a very quick route to a business partnership dispute. For example, one partner may not disclose some of the profits they have made to the other partner, this is known as “secret profits”.
  • A failing business – Another very common reason for partnership disputes to arise. If a business is failing, one of the partners may try to shun their responsibility or run away from debts that are payable by the company.
  • Outlined above are some of the more commonplace reasons for business partnership disputes, although they can happen for several other reasons, depending on the individual circumstances. If you and your partner are in the midst of a partnership dispute, seek legal advice. The earlier you take action, the more likely it is that you will be able to come to an amicable resolution. Don’t let it build up into something that it doesn’t have to be.

Business Partnership Dispute? Need the right legal advice?

If you all going through all about to enter a potential dispute with your business partners, get in touch with our specialists today;

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