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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