If you’ve ever seriously considered starting your own business at any point, then you’ve undoubtedly thought about the many obstacles that lie ahead: From securing sufficient funding to finance your business to structuring a sound business model that will win over potential investors, running a business is fraught with difficulties from day one.
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What is a Business Partnership?
Running your business on your own can sound intimidating. That’s why many business owners enter into a small business partnership rather than staking it out on their own. With a partnership, you dramatically improve your chances of success. In fact, 54% of startups that raise $10 million or more have more than one founder, and teams of two raise 30% more money when funding their venture.
Historically, some of the largest enterprises and companies birthed from partnerships. What’s important to note is that in most cases, both the founders brought something more to the table than their financial resources. For instance, Microsoft co-founders Bill Gates and Paul Allen started the tech giant together in their garage. According to Allen, Gates was the “sanity check” on the company’s ideas, and Allen helped more with big-picture strategy.
Jerry Greenfield and Ben Cohen, co-founders of Ben & Jerry’s, both shared a similar vision for their company: They subscribed to the belief that “business should be using its power to help address social and environmental issues,” and not just turn a profit. As you can see, finding a partner is more than just improving your personal chances of success; it’s finding the right person that aligns with your core beliefs and goals going forward. For that reason, finding the right business partner is of utmost importance.
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Choosing the Right Partnership Structure
So, what types of partnerships are available to you? Here are three to consider:
In a general partnership, all partners involved agree to take mutual responsibility for the business’s debt and running it’s day-to-day operations. General partnerships are a popular choice for business owners because they are easy to start and can adapt to many different business models.
Limited partnerships are ideal if partners will take on different roles in running the company. For instance, one partner may a backseat role as an investor, while the other oversees operations and logistical matters.
Limited Liability Partnership
Stuck wondering, “Do I Need an LLC?” Under a limited liability partnership, owners have limited liability, meaning that should the business incur debts or a lawsuit, the owners’ personal assets cannot be touched by a court of law. Additionally, profits go straight to the owners, who are taxed individually based on their income.
Each of these structures has its own pros and cons and should be carefully considered by you and your business partner. Whatever type of business structure you opt, it’s important that you and your business partner are on the same page and agree going into it. Nothing is worse than launching a business venture on the wrong foot.
How To Find The Right Business Partner?
So, what all goes into finding the right partner? Your choice is as important as selecting the right structure for your business. Fundera’s infographic below lays the process in eight easy steps.
Infographic Source: Fundera