Forming a business partnership offers many benefits to a fledgling company, but there is always no guarantee of success. Whether you’re forming a business partnership with a new friend, trusted friend, or an angel investor who’s passionate about an industry idea, there are some important considerations to weigh prior to putting your name to the agreement. Here are three tips for ensuring success:
The first thing that you want to consider is the market. Forming business partnerships generally include industries and markets that are complementary to yours, so it’s important to ask yourself what your target customer wants. For example, if you operate car dealerships, an auto part dealer might not be a good fit; likewise, a culinary college may not be a good fit for an entertainment company.
The second thing to keep in mind when forming a business partnership is how the partnership will generate revenue. This can be done in a variety of ways, including traditional contract contracting, licensing, leasing, investment, etc. Remember, when forming a business partnership, don’t focus on how much revenue can be generated; instead, ask yourself how you can help the other company achieve its goals. In general, the more productive the partnership, the more revenue it will generate; conversely, the less productive the venture, the less revenue you stand to reap. These auctions, via sites such as Boat Parts are also available online.
When forming a new business partnership, it’s important to remember that partners are individuals, and as such, should form their own legal agreements. Forming a written agreement outlines the responsibilities of each partner involved, and helps to guide through the process. For instance, if you’re working with an angel investor, you’ll need to ensure that he’s comfortable working alongside you while funding your project. Similarly, if you’re working with another individual, you should have a written agreement detailing the responsibilities of both parties, as well as specific details regarding the finances of the partnership.
Once you’ve determined that you’re going to pursue funding and do so through an angel investor, you’ll need to form a strategic business partnership in order to legally separate the two businesses. It’s best to keep separate company names and use a shell company in the case of an exit (i.e., selling the business). However, business owners should have one main company for all of their endeavors, for tax purposes. If you want to take the same risks as the other party but don’t have to worry about leaving a bread crumb behind, then consider forming a general partnership. These types of partnerships generally allow for more flexible financing terms and are often seen as less risky than venture capital funding.
Forming a business partnership is not a complicated process. If you’re serious about starting your own business or growing your current business, it can be worth your time and effort to learn about this important aspect of small business finance. The IRS will consider some forms of business partnership as being income-active, which greatly reduces your personal taxable income. This can be important if you wish to incorporate as a CPA (certified public accountant), as the taxation of your partnership money can potentially be reduced. In addition, partners can use their personal income tax returns to manage business finances, such as how much money they need to spend on advertising and growth capital.