5 Key Points That Turn Co-Founders Into Superstars

5 Key Point That Turn Co Founder into Superstar

Co-Founders: A cool word by today’s standard but a dark web from inside. The two Steve’s, the first a lonely young man with philosophical queries, the other one through a computer programming genius. We won’t say anything more because by now we are sure you must have guessed who we are talking about. The two Steve’s were poles apart (One Steve had even duped the other of a substantial amount of money for the work done on making a pong game), but what made them create the world’s biggest company in terms of market valuation?. Well, this is a question which is hard to answer. And in this blog, we delve into the 5 key points that turn co-founders into superstars. It takes a lot of the business partnership to flourish and blossom amidst the grueling demand of a start-up. There are uncountable stories of start-up partnerships ending in lawsuits and at times of violence.

So here’s a list of few important points that you must check out before making that one handshake that may open the doors to greatness or the freefall to an obscure isolation for you.

The Big Picture

As partners in a budding start-up, the co-founders must always aware of the big picture at the back of their mind. They must be at all cost be bound by the Vision and Mission of their Venture. Co-founders work best when they bring expertise from different domains to the table. But these contrasting expertise unless channeled towards a common goal can lead to ego clashes. A difference of opinion is a must for creative solutions to problems. But co-partners must refrain from being rigid and vehemently be sticking with only their point of view. Success depends on teamwork. Business partners must remember that their partnership must be synonymous with the engine and wheel of a vehicle. While the engine churns out the power that is necessary to drive the vehicle, the steering wheel is the guide towards the destination. A successful business partnership has similarities like a successful marriage that survives long if one partner acknowledges the contribution of the other to the startup equivalent to his.

Read Also: Things to Know Before Forming a Business Partnership With a Friend

Hire Expertise: Never Settles for The Ordinary

While working on their flagship offering of the day, Apple co-founders were stuck on the power supply. In came Rod Holt, apple employee no #5, who charged 200$ a day for working on the power supply. Years later, Rod Holt while remembering the good old days recounted that when asked for his fees, Rod Holt had replied that he was not sure that the co-founders could afford him. Mush to his dismay the co-founders replied they could. And this is Rod Holt came onboard Apple 2 and became part of history. This is just one of the single instances where co-founders hire expertise to find solutions to a nagging problem that threatens the very values and integrity that the start-up stands for. Hence, as co-founders, the most important quality is to be flexible when the situation demands you to be and play down your egos. Always refrain from supporting limitations that affect the core values of your business or product. Founders should be bold and never settle for the ordinary.

Read Also: 7 Partnership Factors That Can Make or Break Your Business

Flexibility: Should Be Quick to Embrace Change

Today’s hot is Tomorrow’s cold. This is apt for the ever-changing landscape of technology. Remember Yahoo!!… There greatest mistake was turning down Google in 1998 for $1 million and the rest, as they say, is HISTORY. Co-Founders must be aware of the scalability of their idea and back it up with complete faith. One or both of the co-founders must remember that an idea is just the beginning of the journey. In the larger scale of things, both must agree on important changes that can not only redefine the scale of the business venture but open doors of opportunity that they never realized existed in the first place.

Read Also: 7 Signs of A Bad Business Partnership or Partner

Accountability

Be very careful and avoid someone who is all talks and no work. Drumbeaters are the worst you would want to associate with. Remember, the biological clock works differently for individuals. While some may be up and ready to go with the dawn, others may take a little longer and hit the road running at 9 AM. While some can get a lot done in 5-6 hours others might take 9-10 hrs. As long as your potential co-founders skill suits the partnerships requirement and he is a workaholic, these nits and bits can be overlooked. Each co-founder’s role and responsibility must be clearly defined from the outset to check friction and ensure individual accountability. As long as co-founders appreciate the skill set they bring to the table and respect each other work ethic, accountability will never be an issue.

Read Also: 7 Most Important Clauses to Include in a Partnership Agreement

Money

Grab that cash with both hands and make a stash

New car, caviar, four-star daydream,

Think I’ll buy me a football team

These starting lines from the famous song ‘Money’ from the legendary band Pink Floyd perfectly echoes the common human sentiment when it comes to Money. Remember, Money changes people. There have been co-founders who have sold all their shares and taken the first flight back home at the first glimpse of a million dollar buyout. Good for them, but it leaves the other partner stranded and with a lot of work on his table. On the other hand, sometimes a co-partner, who may have mouths to feed and loans to be paid, may be in dire need of money. As a co-partner decide beforehand if you can handle such a partnership rather than finding yourself entangled in a whirlpool of someone else’s greed or need. It is imperative to set crystal clear financial goals from the very outset.

Read Also: 7 Kinds of Business Partners You should Avoid

Important Tips

  • Attend hackathons or events like ‘founder dating’ to meet potential creative and skillful co-founders. Events are great opportunity to exchange ideas and meet equally enthusiastic people.

  • 50-50 partnership is never a good idea.

  • Refrain from being a Dictator. Never act like a boss and feel you are only accountable to yourself. A great product does not always mean a great company. So work on management skills and be a true leader.

  • A good idea attracts investors easily is a myth. It took centuries to prove that the earth was round. A good idea will not necessarily attract immediate investors.

The above were five important points which we think co-founders must consider at the very beginning before embarking on the roller coaster ride of the start-up universe. In addition to these, the co-founders must agree to a mutual agreement that clearly defines the objectives and goal of the business and put it into writing. The legal agreement must also cover the exit strategy if things don’t work out in the first place. However, these lines should not deter budding entrepreneurs from taking the leap of faith. Remember one thing, a big failure is a doorway to great success. During one of those days that bring disappointment and anguish, co-founders must remember that knowledge can bestow fast legs to your startup but it is imagination that will give it wings. So imagine, plan, implement and chose a great co-founder that suits you the best and fills in the gaps that you can’t. In the words of one of the greatest entrepreneurs of our times “Its all about connecting the dots”.

7 Partnership Factors That Can Make or Break Your Business

Business Partnership Factors

A business partnership is a very common choice when you are looking to start a new business or expand the existing one. On the top, it may seem like a safe and brilliant idea to find a partner when you are in need of investment or resources or just the right company, but it actually has its downsides as well.

There are many factors that can help you achieve great success in the partnership, but if not tackled carefully, the same things might end up breaking your business. Read on to find out more about such things.

Trust

An honest and open relationship between partners is the foundation of any successful business partnership but It is very crucial for business partners to trust each other. A business is much like a relationship; if you do not trust your partner, you’ll never be at ease about them. Instead of choosing a new, unreliable partner, make partner with someone whom you know and trust well. The lack of trust among partners is harmful to the business as well as for the relationship. If you cannot trust them as a person, you’ll never be able to trust and respect their decisions, which will lead to conflicts in the business.

Planning

Businesses often neglect the importance of proper planning to find the right business partner. The planning should involve the things you can do to present yourself and your business as a strong venture in the eyes of the prospective partners. Let them see the positive points of your business and tell them how they can benefit by partnering with you. But make sure to provide only correct data and truths, otherwise, it may cause a big issue later on.

Skills

A business partner must essentially be someone who complements the skills you lack. Having a partner who has the exact same skills as you is generally of no use unless there is a great demand for that particular skill. You will be exhausted and even irritated if all of you are working on the same skill set. If you are looking for a partner for his skills and talent, make sure to choose the one who has what you don’t.

Recommended Reading: Things to Know Before Forming a Business Partnership With a Friend

Goals

It is also very crucial for business partners to have the same goal towards the company. Then only they can work for the same thing and think alike. It is natural for each person to have some personal goals and ambitions in mind, but they should not contradict with the business goals. And your partner and you should be able to prioritize the business if and when it comes to that. Make sure to keep checking on and revising your goals to ensure the success of the business.

Expectations

It is natural for people to have expectations from others. But the easiest way to save yourself from disappointment is to keep moderated expectations so that your partner can surprise you more often with amazing work. You should know the limits and potential of your business partner and build your expectations accordingly, and you’ll never be disappointed. Otherwise, you will just keep bugging them about everything you expect them to do.

Engagement

No matter how many skills or talent your partner have, it is all useless if he/she is not driven enough. That means, your partner should have a zeal towards the business. Even if your business partner is more of an investor than the doer, he should at least be engaged in the business by attending regular meetings and all. The interest in the business is what will keep all the partners motivated enough to go on, no matter what.

Adjustment

A partner should be able to adjust himself with other partners as well as according to the business situations. This applies to all the partners of the business including you. A business will often see ups and downs during its course, and partners need to be able to roll with the times.

To create a good balance in the partnership and make sure that it doesn’t harm the business, you should continuously evaluate yourself as you do with your partner, and change yourself if and when required.

Things to Know Before Forming a Business Partnership With a Friend

Business Partnership with Friends

A business partnership is usually formed when a business is in short of financial or personal and/or other resources. When looking for a business partner, the first choice is usually a close friend or relative who has been in the same business/industry as yours and could complete the void in your business perfectly. The major reason for choosing a friend as a business partner is the trust factor. You know them, trust them and believe their skills.

But is it actually wise to get into business with your friend? What if it ends up destroying your friendship with them? What is the business fails and you start blaming each other? These and many other questions must be answered first before you plan to start a business partnership together.

Things to Know when starting a business with friends

Legalization of the partnership

A legal business partnership gives you the facility to easily start your partnership business and take the help of the law, if and when needed.

Partnership Agreement

The partnership agreement will consist of the details of the individual roles, responsibilities, share, the percentage of profits & losses, etc. so that your friends know what they are supposed to do in the business, and you do not have to continuously remind them of that.

Important Things to be Discussed in Advance

These will include the usually tough conversations like who will be the owner, the CEO, the head of product, and other things like salary, job title and descriptions, and so on. It is better if the roles and titles are assigned according to the eligibility of the individual partners.

Friendly Favours

Remember that you do not owe your friends any favours, at least not within the business, and you are not supposed to make compromises when it comes to their roles and responsibilities in the business. Each partner of the business should be treated equally. If you can do that, they only get into partnership with your friend.

New, Fresh Perspectives

A new partner in the business should be able to bring fresh ideas and perspectives. It’s a good thing if you and your friend have a lot in common and think alike, but you should also be able to present different perspectives on certain conditions. Otherwise, it might cause shortness of new, different ideas.

Personal and Professional Lives

When you include a close friend into your business, you give them access to your professional life and things that only your office staff or management know. These things are likely to get out when you socialize with the same person with whom you do business.

Pros and Cons

There are both advantages and disadvantages of doing business in partnership with a friend. It depends on which ones matter the most to you.

Pros of Starting a business with a friend

  • You get a partner that you actually know and even trust.
  • They are likely to share your beliefs, thoughts, and decisions.
  • There’s already a good communication standard between you two.
  • You better understand each other’s strengths and weaknesses and can assign roles accordingly.

Cons of Forming a business partnership with a friend

  • A friend as a partner may not receive the same level of respect from you as an unfamiliar partner will. It is more casual and less formal kind of relationship.
  • It is usually difficult for people to confront a friend the same way they will do any other partner or employee. Such confrontations may often lead to breaks in friendships.
  • It may become a matter of pride and respect between friends as to who is the boss in the mutual company.
  • The chances of your professional life overlapping with your personal (social) life are very high.

Should you do it?

Starting a business with your friend has a nice ring to it. It can become a good thing or a bad thing depending on how you take and treat it. It would be an amazing thing to build a business having your friend beside you, helping you in every step. It won’t be an easy thing and you may often face challenges when you’ll have to choose between your friend and the business, but you can deal with that in an intelligent manner.

Overall, you can certainly form a business partnership with a friend if you think it is worth it.

How to do it?

Wondering how to start a business with a friend? Well, it’s not difficult at all. You just need to register a partnership firm under your names, and then you can start right away. Make sure to consult with a good lawyer and draw a substantial partnership agreement to keep your personal (social) and professional lives separate.

Do’s and Dont’s

  • A business partner must be someone who pushes you, challenges you, and who has the skills and intelligence that complement your own skills. If you have such a friend, you should get into partnership with them. But do not make your friend a partner in business just because he’s your friend, however, doesn’t have any other special skill.
  • Define the roles of each partner clearly, and focus on your own work rather than continuously interfering in someone else’s job.
  • Make sure to legally register the partnership business entity.
  • Choose a CEO who actually deserves the title.
  • Do not make special favours for your partner friend.
  • Do not partner with a friend who thinks exactly like you and has a similar personality and even skills.
  • Do not exclude or ignore other team members and/or partners when discussing ideas with your friends outside the office (on a social gathering).
  • Do not let friendship overcome the professionalism.
  • Do maintain appropriate bookkeeping and file regular tax returns.
  • Communicate often and in a friendly yet professional way.
Recommended Reading: How to Build a Good Partnership without Ruining the Relationship

Overall, a business partnership with a friend is not a bad deal, to begin with. However, the success of such partnerships depends largely on how well you can keep your personal and professional lives from interfering with each other. The same things, more or less, are applicable to a business partnership with a spouse.

Types of Business Entities And Their Advantages and Disadvantages

Types Business Entities

Before you start a business, you need to choose the type of business entity that perfectly suits your requirements and the kind of business you are planning to start. A business entity is the legal business organization required to conduct business officially in an area. There are many reasons why you need to register your business as a legal entity. It not only provides you personal protection but also it defines the taxes to be paid by your organization, the kind of partnerships you can form, and the way your business will function and by whom.

There are 5 basic types of business entities as follows:

1. Sole Proprietorship
2.Limited Liability Partnership
3.Limited Partnership
4.Limited Liability Company (LLC)
5.Corporation

Sole Proprietorship

A sole proprietorship needs not to be registered officially. A sole proprietorship conducting a business and having no partner is the sole proprietor. It is the simplest type of business entity. These businesses can still hire employees and external help but cannot have more than one owner. This type of business has a big disadvantage that is the proprietor of a sole proprietorship remains self-liable for all the business’ obligations. So, if a sole proprietor business keeps running into money-related trouble, the creditor can bring claims against the entrepreneur.

Read Also: 7 Kinds of Business Partners You should Avoid

Sole Proprietorship Pros and Cons:

Advantages of Sole Proprietorship

  • A sole proprietor has the power of decision-making and complete control over the business.
  • There is no cost of the establishment as you can work from anywhere if your business is not registered.
  • No tax liability
  • The cost of forming such a business is zero.

Disadvantages of Sole Proprietorship

  • All the risks and liabilities are borne by the owner of the business.
  • No legal protection for the business.
  • Investors and creditors are able to collect their dues against the person or business property of the owner.
  • Getting loans is not easy.

Limited Liability Partnership

Some professional businesses and companies can form limited liability partnership (LLP) with one or more persons. In this kind of partnership, the liability of each of the business partners are limited to the company and a few other things, but not on the personal activities of other partners. A business needs to be registered as LLP with the local or state registrar to be eligible for the benefits.

Recommended Reading: How to Build a Good Partnership without Ruining the Relationship

Limited Liability Partnership Advantages and Disadvantages:

Advantages of LLP

  • A business partner is not responsible for the wrong/illicit activities of other partners.
  • An LLP is a tax pass-through entity, that means all the tax liability are divided among the partners of the business.
  • Registration of LLP is cheaper.
  • There are fewer rules associated with it.
  • It is comparatively easier to exit an LLP partnership.
  • No upper-limit on the number of partners.

Disadvantages of LLP

  • Requires minimum two partners.
  • Fundraising options are limited.
  • Less business credibility
  • In some countries, LLP can only be formed by professional service providers including lawyers, accountants, and doctors.

Read Also: 7 Signs of A Bad Business Partnership or Partner

Limited Partnership (LP)

A limited partnership firm has both regular partners and limited partners. A regular/general partner is responsible for managing the day-to-day tasks and management responsibilities of the business, while the limited partners are liable only to make their part of capital contributions, as and when required. A limited partnership is required to have at least one regular partner. This type of partnership works great in the real estate and other related businesses where the general partner can get tax and investment benefits by forming an LP.

Limited Partnership Pros and Cons

Advantages of LP

  • Less paperwork and formalities than a corporation
  • An LP is not liable to be taxed but individual partners have to file expenses in their personal income tax returns.
  • A partner is only liable for his own debt equal to the amount he invested in the business.
  • The limited partners do not have any role in the management and decision-making process.
  • The limited partner can leave anytime without dissolving the partnership.
  • This is a kind of investment opportunity.

Disadvantages of LP

  • The general partners are liable for all the risks, dues and debts of the company, as well as for the consequences of their decisions.
  • It is necessary to create a partnership agreement to define the roles of the limited partners in the company.
  • It may be essential to hold annual meetings for all the partners.

Limited Liability Company (LLC)

An LLC is the type of business entity where the liability of the company is limited. It is usually owned by one or more people. It provides protection to the owners as they are not personally liable for the debts and dues of the company. Same as every other partnership, an LLC is formed by registering your partnership with the legal office and signing an LLC operating agreement.

Limited Liability Company Advantages and Disadvantages:

Advantages of Limited Liability Company

  • It is a better alternative to LP, as it doesn’t involve any personal liability to business owners.
  • It is inexpensive to form.
  • LLC is owned by all the partners, and they can decide on how business profits, losses, shares, and management responsibilities will be shared.
  • These are usually good for real estate partnerships.

Disadvantages of Limited Liability Company

  • No or less prospect of investors
  • Doesn’t work for a complex business structure.
  • As one of LLC partners, you cannot pay yourself for the work.

Corporation

A corporation is the top type of business entity. It is usually owned by the company shareholders and managed by a board of directors, which is also formed by the shareholders. The board is responsible for making all the important business decisions and firing/hiring officers in the company.

Advantages of a Corporation

  • The ownership is transferable based on who has the most shares at a given time.
  • It gives you the ability to make public stock offerings and acquire capital.
  • Generally, business shareholders and employees are not liable for the company’s debts and obligations, while shareholders will only lose their own investment if the business ever fails.
  • Well-established business structure with roles and responsibilities clearly defined.
  • The organization employees can receive stock benefits.

Disadvantages of a Corporation

  • Expensive to form and manage.
  • More paperwork and time-consuming.
  • Shareholders can only hire/fire the managers and officers but have no direct control in the managerial process.
  • Tax is charged on the corporation as well as on the individual salaries of the shareholders, thus causing double taxation.

Read the above descriptions, types of business organizations advantages and disadvantages carefully, and choose the right business entity for your business.

How to Build a Good Partnership without Ruining the Relationship

Good Partnership

The one thing we all are afraid of when building a business partnership is ruining the personal relationship with the person. A partnership is prone to arguments, disagreements and even occasional fights. This will have a direct impact on your personal relationship with the partner. Most people, when looking for a new business partner, prefer to go with a good friend, relative or colleague whom they know and trust. While this might be good for the business, it can have a negative impact on your personal relationship with the person.

It is very much possible that you will eventually start disliking the person or liking less than before or even start hating them when you are engaged in constant fights and arguments for a while during the course of the partnership. This doesn’t mean that you should not form a partnership with a close friend or relative. It only means that you will have to take some extra measures or be extra careful not to ruin the relationship while building the business.

Recommended Reading: 7 Kinds of Business Partners You Should Avoid

Here are some things you can do to make sure that you continue liking each other even after spending years in the partnership.

Work together more often

When you are sharing a business, you need to work together very often. Even if you do have specific responsibilities and duties, you can still work side by side. When you are together more often, you’ll be able to communicate more frequently with each other rather than keeping things in mind or sharing them with a third person. It’s not enough for partners to only attend weekly meetings together, they should be doing tasks, having discussions and making decisions together. This helps to build a trust between the two that goes a long way in the relationship.

Like the person underneath

Even if the ideology or thinking of your business partner doesn’t match with that of yours. That doesn’t mean that he/she is a bad person. Remember why you liked them in the first place and keep reminding yourself of that whenever you feel like hating them. Try to be the change you wish to see in your partner. Understand their strengths and weaknesses and behave accordingly so that you can continue having a good relationship.

Make decisions together

Many business partnerships fail because one of the partners start treating himself superior to others, making important business decisions by himself and all. Even if you are given such an opportunity to be able to make decisions together, don’t do it. When a decision is made by consulting all the partners and after mutual discussion, the responsibilities and blames are shared by every partner when the decision results in a success or failure. It is natural to like a partner more when he/she respects your inputs in the decision-making process.

Let them speak

Never, ever make your business partner feel unwanted by neglecting their inputs or by not listening to them when they speak. It is important for business partners to be empathetic if they wish to establish a successful partnership and maintain the relationship with each other. You should give them enough time and space to share their ideas and then you can, in a proper way, input your thoughts on it. Try putting yourself in their shoes to understand exactly how they feel about you and about the partnership.

Let them do what they’re good at

One important way to build a friendly partnership is to understand the strengths and likes of you partners. If your business partner is good at something, you should allow them to take that responsibility. This not only increases the chance of success but also strengthens the relationship on the personal level. Also, be ready to make the sacrifice when there’s something you are both good at and want to do.

Read More: What are the Different Benefits and Risks of Partnerships?

Do not lose a good friend for the sake of building a bigger business. Respect your friendship and your partner as a person to ensure a smoothly running partnership.

7 Kinds of Business Partners You should Avoid

bad business partner

Business partnerships can either end up in a disaster or a blessing, depending on the relationship between partners. Every now and then, we hear about partnerships going bad, usually because one of the partners was not good enough or the relationship became sour over the time, and so on. So, what can you do ensure that doesn’t happen to your business partnership? There are many things. The most important one is choosing the right business partner. There are many signs of a bad partnership, but we often neglect them when choosing a partner.

Although it is not easy to differentiate goods partners from bad, not in the beginning, there are some specific bad elements whom you can recognize even from far away and need to avoid making a partner in your firm. Here is a list of seven kinds of persons you should avoid when looking for a business partner.

1. The ‘Employees’

Some people are just meant to be employees and are not able to manage the responsibilities of a business. A person with the employee mindset expects to get paid regularly, if not weekly or monthly, work only during office hours, spend time with the family, and follow instructions rather than give them. What happens when you make such a person a partner in your business? They will leave you as soon as they get a better “job” opportunity or as soon as your investment opportunities fade away. Avoid the individuals who are not open to risks or are willing to give time and energy to the partnership.

2. Those who talk much, work less

You might have seen many people who just talk and talk of how big or good they are at something but usually have no record or proof to show. These kind of people are bad for partnerships. They will expect you to do everything that matters and will be gone when it comes to taking responsibility. They will assure you that everything is going great, and you might even become a victim of their charm if you are unfortunate enough. Be sure to check and verify the CV and other credentials of the person when interviewing for a business partner.

3. A Procrastinator

These people like to delay things off and they always have the right excuse for that. They pretend that they want things to be ‘perfect’ no matter how long it takes to do it. It seems like the right decision at the time, but you usually end up delaying important decisions, piling up meetings and other things. Some of these people are plain lazy and prefer to leave things until the deadline when it usually becomes too difficult to finish on time. Avoid such excuse-giving procrastinators if you wish to protect your business from partnership conflicts, and choose a partner who is able to make the right decision at the right time.

4. The ‘Inconsistent’ ones

A person who is not able to stay with one decision or like to switch things very frequently can be termed as ‘inconsistent’. These people like to experiment with different things and decisions, which might be a good thing for the business, but not if you are a startup and can’t afford to lose money on unnecessary things. You can identify this trait by simply looking at the work profile of the potential partner. If they quit or switch jobs very often and frequently, the chances are that they will do the same with the business.

5. The ones who are always ‘right’

Or at least they think they are. These people like to make all the important business decisions without even discussing with other partners. They assume that discussions are only going to diminish the value of the decision. They are even ready to demean other business partners who disagree with them. Also, they are usually eager to blame everyone else but themselves when a decision goes wrong. Try avoiding such people when choosing a business partner. Find someone who is good at communicating, not dictating.

6. Bad with people

There are many people who do foolish things knowingly and then there are ones who do not even know what constitutes as good behavior and what doesn’t. They do not care how they treat other people and often end up offending someone. A business partner is no good if he cannot treat business customers and clients well. If your prospective partner is bad with people, you shouldn’t consider making him a partner in the business. You will never see them coming, and everything will be ruined even before you realize it, just because they opened their mouths.

7. The ‘Dreamer’ ones

It is good and often necessary for a businessperson to have a dream, but it becomes a problem when dreaming is all that he does. Avoid making a business partner who dreams of becoming rich very soon just because he thinks he has a great idea but doesn’t actually know anything about running a business. They normally plan to use your business as a ladder to reach the next step of success. While it’s important for businesses to stay optimistic and positive, they should also stay close to the reality.

Recommended Reading:  How to Protect Your Business from Partnership Conflicts

A business partner should be like ‘other half’ in your business relationship where you are the first ‘half’, and you two together should complement each other. He should be willing to give the same efforts, work and time to the business as you do, and you should be able to respect him and his inputs as a partner.

How to Protect Your Business from Partnership Conflicts

Business Partnership Conflicts

A business partnership is vulnerable to many complexities, and these issues, if not resolved in time, can lead to disputes. In our previous article, we discussed some effective ways for avoiding business partnership complexities. Here, you will learn how to protect yourself and your business if and when a partnership conflict arises.

A dispute or disagreement is natural to arise when there are two or more people involved in a single business. A partnership dispute, if not resolved in time, can end up destroying your business as well as your relationship with the partner. The future of your business depends on how well you avoid and resolve these conflicts. In this article, we’ll be sharing some effective methods for the same.

Ways to avoid business partnership conflicts

1. Get A Partnership Agreement

A written partnership agreement is the best method to secure the future of your partnership against any disputes. Even if the business partner is your close friend or a relative, they wouldn’t mind signing an agreement as it protects the interests of all the involved parties. The partnership agreement must clearly define the following things:

  • Sharing of each partner in the business
  • Each partner’s role, duties, and responsibilities
  • Who is the boss, if there is one
  • How external personnel will be hired, if ever needed
  • How much is the contribution made by each partner
  • How additional capital requirements will be handled, if needed
  • Percentage of each partner in profits & losses
  • How the decision-making process will work
  • How the decisions will be made in case of disputes
  • What happens in case of a business conflict, such as removal of a partner, disagreement between two partners, dissolution of the business, etc.
  • In what conditions a legal help will be hired and how
  • Types of possible disputes and their resolution techniques

Since every possible dispute situation and its resolution methods are already mentioned in the agreement with the consult of all business partners, the chances of legal disputes are highly unlikely.

Even if a dispute leads to the court, you and your business are protected by the partnership agreement.

2. Hire an Attorney to prepare a Partnership Agreement: This makes sure that all the important things and cases are involved in the agreement, and the document is accepted by the law.

3. Make sure to discuss the conditions, terms and resolution methods with each and every partner of the business before including them in an agreement.

4. Set up a dispute resolution department within the company or hire a third-party service: This might be a good idea to get your business ready for any future partnership conflicts. Many companies have a dedicated department that is responsible for dealing with such issues. The task must be handled by a third-party person who isn’t directly involved in your business. It would be like an internal court within your organization.

Ways to resolve partnership disputes

Even after drawing a full-proof partnership agreement and doing everything else possible, sometimes, you just can’t avoid a conflict. Here’s what to do in such situations.

1. Discuss Calmly

No matter how serious the disagreement is and how much you want to get rid of the responsible partner, you must also think about the survival of the business. Try your best to discuss the matter calmly with the partner, with or without the presence of other partners as needed, to see if the conflict can be resolved somehow without actually harming the business and/or relationships.

2. Hire a Mediator

Hire a professional mediator to help you resolve the issue inside the company. A third-party person will listen to the case and arguments from both sides and can come up with a solution that is acceptable by all the parties. Make sure to keep the talks within the organization as it might negatively affect the market reputation of your company if ever get out.

3. Dissolve the Partnership

The last and ultimate method is to end the partnership or leave the business. I hope your partnership agreement has a clause for such situations. One or more partners can decide to leave the business in a friendly manner, which may still save the friendship or the relationship.

4. Hire Legal Help

If there is no way to calmly resolve the dispute, the only thing you can do is hire a legal help. This does not necessarily mean filing a legal case or anything. You first have to consult with your Attorney and try finding a friendly way out.

What are the Different Benefits and Risks of Partnerships?

benefit and risk of partnership

A business partnership is formed with the goal to bring different skills together with a common vision of achieving success for a shared business. Such partnerships are naturally prone to various risks and challenges but it also has many benefits. You may often face challenges with the leadership, decision-making, sharing of responsibilities and profits, etc. when working with a partner but at the same time, you get the benefits of professional help, assistance and suggestions in crucial decision-making, moral support, financial support and more. So, basically, a business partnership has both its benefits and risks, which we will discuss in detail in this article.

Benefits of Partnering

The potential benefits of partnership are unlimited. You not only get the financial support from your business partner but they are also there to assist you emotionally, morally, and in terms of resources. Here are some other common benefits of a business partnership.

Knowledge and Skills: Partnership is the best method of acquiring the desired knowledge and skills without having to hire paid help.
Increased Efficiency: By reducing the cost and workload, the partnership offers better success opportunities to your business.
More and Better Resources: You get access to more people with better skills, experience, contacts and technical knowledge.
Better Discussion and Decisions: Better decisions can be made when there are more than one people involved in the discussion process.
Effectiveness: Your business partner, with his unique ideas and inputs, can help increase the effectiveness and market value of your products and services.
More Business: Your partners might bring more contacts and thus more potential customers to your business. And if you are partnering with another company, you both get access to each others’ clients as well.
Increased Business Life: It is not easy to run a business on your own, a partner can provide the support you need to ensure a long and prosperous life for your business.
Credibility and Brand Value: Clients usually prefer to work with companies that have more than one partner as it shows business credibility and reliability.
Flexibility: Business partnerships are usually easier to form as they involve less paperwork and usually have benefits in tax as well.

Related Post: Positive and Negative Impact of a Business Partnership

In addition to above-mentioned benefits, it is also natural for business partners to expect some individual benefits in terms of profits and personal goals. When two or more people come together to form a business partnership, they accept a common goal for the growth of the business, but they also might have some personal goals and things they desire to achieve through this partnership. Other Partners of the business should be able to respect these things and make sure that they do not conflict with the common goal of the partnership, which should always be the priority.

Risks of a Business Partnership

If you are thinking that partnership is an all-good and no-risk kind of situation, you are wrong. Each business partnership comes with its own challenges that partners need to understand and overcome in order to ensure a healthy business relationship. Following are some of the potential risks of a partnership.

Conflicts of Interest: The situation where a business decision is beneficial for the partnership but not for individual partners may result in conflict.
Shared Decision-Making: The important business decisions are supposed to be made with proper discussion and consultation with all the partners. When one or more partners are against a decision, it may cause a conflict.
Sharing of Responsibilities and Profits: When a partner believes (rightly or assumably) that the other partner is not doing his duties honestly or deserves less part in the profit, it creates a potential risk to partnership.
Risk of Dissolution: If and when one of the partners decides to leave the business, the partnership may open to the risk of dissolution.
Lack of Resources: When one or more partners are contributing less resources and/or time to the business than expected.
Negative Reputation: Wrong partnership decisions, bad service, and unfriendly end of partnerships can negatively affect your business reputation.

Related Post: Methodologies to Avoid Business Partnership Complexities

The obvious solution to most of these problems is to define clear parameters about roles, responsibilities, and rights of the partners while drawing the partnership agreement at the beginning.

7 Must Follow Methodologies to Avoid Business Partnership Complexities

business partnership

Business partnerships can be a wonderful way for a business to arrange quick capital and skills, especially for small businesses and startups. It can help you get the right resources without actually having to hire someone. But partnerships are not all good. The chances of conflicts and friction get higher when two or more people decide to run a business together.

There are many reasons why more than half of all business partnerships don’t survive. It is usually the matter of ego, money, duties, authority, stress, expenses or something else. It is crucial for partners to come up with a strategy or think of a solution to avoid such business conflicts in the future. Here are a few things you can do and not do to ensure a smooth running of business partnership.

Sharing of Expenses:

Instead of sharing your own capital in the business, you must try to form an associative arrangement where expenses are shared mutually by all the partners of the business. It is wise for all partners to have shared in the expenses rather than just in profits.

Forming a Written Agreement:

Although it is very natural for business partnerships to be bound with some kind of written agreement to ensure the solidarity of the business, many businesspersons still consider it unnecessary as they think they know their partners and can completely trust them. A partnership agreement can help you save your business and personal relationship in case of a conflict and it keeps different partners of the business in line. Make sure to include all the important things in your business partnership agreement.

Know Your Partner and His Goals:

No matter for how long you know the person, you both must have the same goals in order for the partnership to succeed. If your business partner wishes to split up after a few years or months to start up his own business or to do something else, it is wiser to look for someone else to partner with.

Don’t Partner with Someone When You Can’t Afford to Hire:

It seems like the best idea to partner with someone when you can’t afford to hire them at the time, but it really isn’t. You may have partnered with them then just because you needed them but later on, you cannot fire them even if you want to since you are obliged by the partnership agreement.

Discussion about the Future of the Business:

It is easier for partners to be optimistic in the beginning about the success of their business but they may not feel the same as challenges begin to appear. This is why it is crucial for partners to discuss the future of the business in the very beginning, about how and what ways to follow to deal with such future challenges.

Don’t be Afraid to Confront:

When you know that your partner is wrong or you can input better ideas in a certain decision, you must not hesitate to confront your partner. It shows that you feel the same responsibility towards the business, and you both are equally invested in making the right decision for the sake of the business.

Have an Exit Strategy:

An exit agreement is necessary to give you and your business partner the freedom to walk out of the partnership in the case when your business goals are no longer the same. This may at least save your relationship with the person, if not the partnership.

Partnerships may have the potential to take your business to the next level, but it isn’t recommended for every case. Make sure to consult an experienced business lawyer to avoid making a mistake in the business partnership.

Legal Documents and Important Things Required For Business Partnership

Business Partnership

So you have decided that you want to go into partnership with someone. And fortunately, you even found the perfect person to partner with. Now what? The next logical step is to start the legalization of partnership by collecting partnership agreement and other important documents.

What is a Partnership Agreement?

A partnership agreement is a legal contract between two or more partners in the business. It is a legal document mentioning various terms and conditions of the particular partnership. This will include the terms like ownership details, distribution of profits and losses, managerial and decision-making powers, duties of partners and more such details, so as to avoid or resolve any disagreement that may arise during the course of the business partnership.

A partnership agreement is crucial for every business partnership, no matter the type of business or with whom you are partnering with. Just like a personal relationship, a business partnership is also likely to go through ups and downs. A legal agreement will make sure to protect yourself, your relationship with your partner, and your business in the case of a disagreement or a legal issue. The agreement mentions the details of how the particular business should be run and the things that can go wrong and how to deal with them, etc.

Things to include in a partnership agreement

Here are some of the most crucial things that should include in big or small business partnership agreement.

Read Here: Positive and Negative Impact of a Business Partnership

Ownership Information:

This is the most basic thing to include in the partnership agreement. The details of the ownership percentage of different partners in the business, which is usually decided on the basis of their initial contributions, active/passive status, role in the business, etc.

Distribution of Profits/Losses:

The agreement should also mention how the profits and losses of the business will be distributed among its various partners. This parameter is normally based on the percentage of ownership unless otherwise mentioned. It should also mention whether a partner is allowed to make a premature withdrawal from the company account and in what conditions.

Powers and duties of partners:

This will include the details of various powers assigned to each partner of the firm. The duties and responsibilities of each partner must also be mentioned clearly.

Decision-making:

It is also important to establish a decision-making process that will be followed by each partner of the company. This should clearly mention whose decision will be final and how crucial business decisions are to be made.

Dissolution Deed of Partnership:

Business partnerships may be dissolved when a partner decides to leave the business or when a partner dies. It is recommended to form a partnership dissolution deed in advance which will mention the details of how to end the partnership and divide assets accordingly.

Resolving disagreements & disputes:

It is natural for partnership businesses to come across situations when one or more partners disagree about a certain point or decision. In some cases, major business disputes even end up heading to court. The partnership agreement, therefore, should have a clause mentioning a procedure to be followed to resolve such conflicts.

Current Bank Account

To open a current bank account for a firm needs the following documents:

1. Company Incorporation Certificate
2. PAN card of the Firm
3. Address Proof of the firm
4. ID proofs of all the partners
5. Partnership registration certificate (if the partnership has been registered)
6. Any registration document issued by central or state government (normally GST certificate is submitted)
7. Copy of electricity bill, Water & Telephone bill(not more than 3 months old)
8. Authorisation letter on the letterhead of the firm authorizing a partner as an authorized signatory for the bank account.

Read Here: 7 Must Follow Methodologies to Avoid Business Partnership Complexities

Apart from the partnership agreement, there are some other useful legal documents that should be acquired to ensure a smooth business partnership. This may include the following Legal Documents For Business Partnership.

Partnership deed for dissolution: As explained above.
Confidentiality Agreement: To keep private information secure and preserve the confidentiality of each partner.
Letter of Intent: An informal agreement with an overview of the key terms of the partnership.
Employment Contract: It mentions the duties and obligations of business employees and partners, such as profits, pays, leaves, probation period, notice period, termination, etc.
Agreement of Sales of Goods/ Supply of Services: To acknowledge customers of their rights and obligations.
Terms of Use: for your business and website
Privacy Policy: To protect the privacy of your website and personal data.

It is recommended to seek the help of a professional attorney to know more about various documents required for a business partnership.