Partnerships aren’t uncommon in the business world. Many entrepreneurs decide to collaborate and team up, in order to tackle the ever-growing competitiveness on the market, as well as the increasing challenges of market dynamics. Needless to say, business partnerships work best for service-based companies, such as private medical practices or law firms.
However, almost any business type can work well under a partnership banner. The key is in setting it up properly. What’s more, partnerships are usually established between friends, family members or colleagues mainly because it’s always better to form such a business relationship on trust and mutual acquaintance.
Still, that doesn’t mean that people who just met through a networking event or some other means cannot form a reliable partnership business. Again, the important part is to set everything up properly so that both sides can equally benefit from such a relation. With that in mind, here are a few tips on setting up a partnership.
Pick the right name
The company’s name is one of the most important aspects of a partnership business. The main reason is that the name will represent both sides of the business, as well as become a foundation for developing a personal brand should you and your partner choose to engage in such activities later on or from the very beginning. In addition, your company’s name will serve as a means to create a trademark for your business.
That’s why it’s very important to research all the possible names for your company so that you can avoid copyright and trademark infringement. Once you’ve found a suitable name for your company, you should register it straight away. In addition, a good practice is to register a company’s name as a trademark as well. As an example, In the U.S., The United States Patent and Trademark Office can assist you with registering your company’s name as a trademark before someone else beats you to it.
Decide on a business structure
A business structure is essential in establishing a business partnership or any company, for that matter. Among other things, a business structure will determine the amount of paperwork you will need to obtain, such as licenses, permits and insurances. In most cases, a partnership business structure is perceived as a sole proprietorship where liability is divided between business partners respectively. In other words, each partner carries the full amount of liability for their doings.
This partnership is also known as a general partnership. However, a business partnership doesn’t have to be restricted to partnership business structure alone. As a matter of fact, you can also set up an LLP (Limited Liability Partnership). It’s safe to say that this structure is a combination of partnership and LLC (Limited Liability Company) business structures. This will allow you to create a partnership agreement. Still, it’s strongly advisable for each partner to have an experienced attorney, such as Allan Snelling LLP, for instance, present so that they can speak on their behalf. That way you can clearly define both the obligations and rights for each business partner.
Conduct due diligence
As mentioned before, a partnership agreement is essential when establishing an LLP. However, such an agreement, although not necessary but is strongly advised to have, should be included in your due diligence process. From al legal point of view, a partnership should not be solely founded on mutual acquaintance alone. If you want to establish a proper business partnership, roles and responsibilities should be clearly defined and agreed upon.
What’s more, agreements should be in the form of a legally binding contract. This is a vital step in deciding how a particular partnership should be managed. For instance, both partners, or multiple partners in some cases, should decide and agree on decision-making, sharing profits, making investments and general management of the business, among other things. This will allow all the partners to have equal rights, as well as an equal power in not just managing but also running a business.
Obtain proper insurances
Regardless of the business structure and partnership agreement, every business has liability to worry about. That’s why you must consider proper insurances that will protect both the business and the partners from such liability. As an example, a general liability insurance policy protects your companies form legal claims made against it.
As you may already know, any legal claims against your company are difficult and costly processes, which is why this insurance policy is designed to help you out in more ways than once. Another legal aspect you should consider regarding insurance policies is personal liability. This is very important for service sector partnerships such as law firms or medical practices. In this case, Errors and Omissions insurance policy may also be a good way to protect yourself from liability. You may have general liability insurance but that policy doesn’t cover personal liability claims.
Setting up a partnership business can oftentimes be a challenging task. You want to get every detail right both legal and otherwise, in order to ensure that everything can work out the best way possible. It’s also important that partners are on the same side regarding every aspect of running a company so that you can ensure success.
