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The pros and cons can be endless and vary on many scales depending on the type of business you are in.
I'll use mine for example. I started an Internet advertising agency and I could have decided to pay a programmer to program the site, a designer to design the site, a copywriter to write the content, an employee to handle the support. The question that comes to mind is, can I afford all that and can I trust all of them?
What helped me decide was that I considered the benefits of having a partner, versus hiring a programmer.
1) I know he wouldn't just ditch the project and sell the scripts to someone else.
2) By giving him a fair share of the profits he is more committed and do what it takes to keep the business going.
3) Since I can design sites, write sales copy and great at customer support, I am able to handle everything else. At least until we expand, which is soon!
It was the best decision I made because his programming skills and knowledge has become invaluable to our company. I could have some crazy dream or idea of something and ask him if it's possible. His response is always, "it's not impossible." I love hearing that response when I come up with an idea.
The only cons I have to it is the split in profits. That's it. Yeah, he's in Russia and I'm in the States, but we communicate very well. That's another thing to consider, is the communication going to effect your business? If it does, good or bad? When working with a partner, you must always come to agreement and be able to understand the other person.
Good luck with your decision.
Thank you for your input.
Pros and Cons of Partnership Agreements. Hope this helps, LUCKIEST
Easy to form Set-up expenses are kept to a minimum, and the legal documentation
required to form a partnership is more straightforward and less
complicated than that needed for incorporation. Direct rewards Partners have more motivation, as they directly share in the profits. Improved growth possibilities It
is generally easier to attract capital for financing a business
operating under a partnership than it is for a sole proprietorship. Flexibility It is easier to execute decisions than it would be in a corporation,
but it is more difficult than it would be in a sole proprietorship. Freedom from bureaucracy This arrangement will give you more freedom from federal regulations and taxation. Disadvantages Unlimited liability of at least one partner One or more partners must assume the business risks and purchase considerable insurance to protect the business. Instability If
any one partner decides to quit or passes on, the partnership is
dissolved. The business can still operate based on the right of
survivorship and the creation of a new partnership. Partnership
insurance should be considered. Difficulty in obtaining large sums of capital Long-term
capital may be difficult to find. Using partnership assets as
collateral makes it somewhat easier than in the case of a sole
proprietorship. Firm is tied to the acts and judgement of one partner as agent All partners can be held liable for partnership business activities and the commitments of any partner. Severing partnership ties Buying out a partner can be a difficult process, unless an agreement is reached at the beginning of the partnership.
Some phenomanol information, thank you!
Personally, I think the benefits are finding someone who is your complement (e.g. it's great if you don't love to sell to find someone as a partner who can really drive sales), who has a ton of passion for the business (so they can pick up the momentum times when you get tired or discouraged). I do think, like any relationship, it is critical to have someone you really trust and someone who is very mature. Make sure a partner really understands your business warts and all. Have them sign an NDA and make sure there are no surprises when they get in. And, above all, make sure that they make a real investment in the business (e.g they put a bunch of money in, leave their job to join it, or something). YOu don't need a partner who's really a parasite.
...I could go on, but that's probably the key things.
A good basis for selecting a business partner (I use the term partner, loosely) is if you both have different skills that are required by the business, and that these skills compliment each other.
Also, the partners personalities should "fit" each other comfortably. You must be able to get along under pressure.
You should both have the same vision and priorities for the business direction.
Another good reason to have a partner is if you NEED his skills continually, and his departure from the business would be very negative. In other words, a greater assurance that he willl be committed, and that it will be unlikely that he will quit, as an employee or contractor might.
I strongly recommend against a "partnership" form of business. A limited liability partnership or an "S" Corp is better. IMHO an "S" Corp is "cleaner" for many reasons. That way, one person can own "controlling" stock, and can therefore make the FINAL decision if there is a conflict. However, be sure that your by-laws are set up to define that a simple majority will carry any motion.
Uncle?? Who are you?? Where are you?? Retired from WHAT??
A few words about you Retired
<<Uncle?? Who are you?? Where are you?? Retired from WHAT??
A few words about you Retired LUCKIEST>>
What's your "beef", Luckiest? And why would you challenge someone who is attempting to help others? Why should anyone have to "qualify" to help someone?
If my advice is an acceptable reply to the one who posted, then let them benefit from it. If not, they can ignore it.
However, I will answer you anyhow.
I successfully operated my own business for 31 years and sold it profitibly. During that time I was president of 3 professional associations....one small (40 members) and two medium (150 members).
I have considerable experience helping others; including teaching seminars, speaking at conventions, writing articles for two magazines, and writing one industry-specific book on sales psychology, product line development, strategic pricing, and sales techniques.
After retirement, I served as an intermediary for several business purchases. I also served SCORE in Hillsborough county (Tampa) for 4 years as a conselor, workshop instructor, Workshop team leader for two workshop tems, and as vice chairman for 2 1/2 years.
So, tell me, Luckiest...Do I now have your permission to help others on this forum?
I think LUCKIEST is just a little overenthusiastic about getting to know people. I thought your comments were thoughtful and good and that if the site wanted to pre-qualify all current (or former) business owners, they would do that.
...plus, I missed the profile when I registered and haven't really seen the value of going back and filling it out unless someone wants their house painted
Welcome to the community. I appreciate your comment.
Uncle Leon and FC Painter, In another discussion myself as well as several other people were wondering why people don't put some information about their business on the profile page.
I feel that when I am receiving or hearing information from someone whether in person or online, I like to know a little about them. Luckiest's question of who Uncle Leon is was justified. He is giving advice but all his profile says is that he is retired. Retired from what? Retired from emptying garbage cans for forty years as an employee?
Please some info up in your profile so that others can know a little about you. You don't know where everybody lives or who they know, so you don't know if somebody might just need their house or business painted. It is another form of marketing.
I have, since, entered some profile information. However...as previously stated: If I offer a suggestion, it is based upon over 30 years "in the trenches". The recipent may either consider it, or reject it. Either way, it's no profit or loss to me.
If I attempt to help someone, it's payback to others for the help I have received from others.. It's now time for me to pass it on. However; to paraphrase the old cliche: I will lead the horse to water....From there, it's up to him whethee he chooses to drink.
Uncle Leon, Thank you for filling out the profile page. I appreciate knowing who I am talking with.
Hi Uncle Leon,
I've found that your suggestions/remarks are very useful. Would you please drop me an email at email@example.com.
If a partnership type of business entity should be selected (instead of a corp.) a very good "break-up" or "Buy-out" agreement should be written into the partnership agreement when initially formed.
Hi Uncle Leon, Would you please drop me an email at : firstname.lastname@example.org
The trade-off-- losing control versus being able to scale your business.
Are you a sole proprietory?
We have 45 people in our company-- the dilution is worth the increased team power.
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