A business partnership can be a great approach you’ve considered to grow your business. Likewise, it can be a solution to your current business needs or someone to share some of the responsibilities.
Having a partner in the business help you divide your work with someone else. When like-minded people share a common goal, they can plan on their varied knowledge and experiences to make success more likely. Hence, running your business with one or more partners seems like the perfect strategy to grow your business and revenue.
In this article, we will take a look at the ’13 Business Partnership Advantages’ you should consider before deciding whether or not you need a partner to start or run your business venture.
13 Advantages of Forming a Business Partnership
A business partnership is great compared to a sole proprietorship. It offers significant benefits to your business. In a general partnership, partners decide to share the business’s profits and losses generated from the business. Indeed, it is helpful for your business and the business partners involved.
The following pointers provide helpful insight into the advantages of business partnerships.
1. Simple operating structure
One of the major benefits of a partnership business is that a partnership is pretty straightforward to establish and run. In contrast to a corporation, it needs fewer legal formalities, and the price is also low. Even registration in a partnership firm is not a mandatory need according to the partnership act.
Only the business partners should have an agreement between them. (Yet, it is advisable to draw a written agreement that protects the co-owners personal assets in the event of future disagreements).
Perhaps you need to fill out a partnership certificate with a state office in order to register the business’s name and protect a business license. This brings potential advantages such as avoiding the annual filing fees (when forming a partnership,) which can sometimes be very expensive for corporations.
Moreover, in case a formal partnership agreement has been worn out, a partnership business can easily be dissolved at any time. This gives each partner the freedom to choose to leave if they wish to.
2. Easy to get started
The owners of a partnership businesses are usually its managers, especially in small businesses. That’s why the partnership company is pretty easy to manage. —Unlike a corporation, which must have shareholders, directors, and officers, all of whom have some degree of liability for making significant decisions.
Also, the registration of business partnerships for taxation with HMRC is quite simple. They don’t need to register with Companies House. Besides, the partners will individually require to register for self-assessment, which they can do online.
Generally, it’s wise to establish a partnership agreement that documents the rights and responsibilities of partners, how the partnership will work, and what would happen in various situations, including exit strategy if the partners necessarily disagree or want to leave.
3. Financial strength
Having a business partner allows you to share the financial burden for expenses and capital expenditures needed to run the business. Suppose you’re running your business as a sole trader, and the total money you have is 100,000. Now, a person, Mr. XYZ, comes to you and makes a partnership deal with you. He has got 100,000 to invest in your business. Now you have more financial strength; 100 000 of yours and 100,000 of your partner, like 200,000, is the capital you can use to enroll in your business.
Business partnerships, more often, state that “More partners = more capital.”
The more partners you have, the more money there may be available from your combined resources to invest in the business. Hence the more strength your business will get. Beyond that, adding additional parties to your partnership can also help you raise more money through their contacts or by lending their expertise. Hence, a partner can also help keep more cash in your pocket.
4. Sharing the burden
You can also benefit from companionship and mutual support by working in a business partnership. In a sole trader business, you’re alone responsible for managing everything from point A to point Z; there is zero division of labor. So starting or managing a business alone can feel stressful.
In a partnership, you’re in it together with your partners. The work will be divided among the partners according to their skills and areas in which they are specialized. For example, you’re good in marketing, and your one partner is going into finance and numbers as he has a financial background. While the other one is outstanding in global marketing or may have previously worked in sales or running business operations.
Hence, each partner will bring their knowledge, experience, skills, and contacts to the business, leading to management efficiency. Additionally, his or her interest gives a better chance of success than any of the partners trading individually.
5. Balanced decision-making
A partnership brings in a set of new eyes that can help you spot what you may have missed. Compared to operating on your own, in a partnership, your business benefits from the unique approaches brought by each partner.
It may help you adopt a new outlook. You’ll gain a different viewpoint about what you do, what markets you pursue, who you deal with, and even how you price your products and services. Certainly, the shared conclusion of arguing a situation is far better than what each partner could have achieved individually.
6. Better work-life balance
Work-life balance is really important. By sharing the work or labor, a partner may also lighten the load. It allows you to take time off to reset and relax, knowing there’s always someone, a trusted person, to keep down the fort. This is one of those potential benefits that’s harder to measure, but it positively impacts your professional and personal life. So, with a partnership business, you can step away from your desk when needed without bothering that the entire business will bite it while you have a Mai Thai on the beach.
7. Potential Tax benefits
One of the key advantages of a partnership agreement you might see is possible tax benefits. Partnership businesses don’t have to pay taxes separately.
In a business partnership, the profits are passed through to its owners, who report their share on their income tax return. Therefore, the profits are only taxed once at the personal level of its owners rather than twice, as with corporations, which are taxed doubled, once at the corporate level and then again at the individual level when expenses are distributed to the shareholders.
This way, the companies don’t get taxed separately, so you’ll not be personally responsible for the business taxes. This allows partners to deduct business losses from their tax returns. And also helps make them easier and ultimately costs less.
8. Ownership and control are combined
A partnership firm is free from government control and has minimum legal formalities. The partners both own and control the business; this way, they can make changes in the firm according to their preferences.
As long as they can agree on how to operate and drive ahead the partnership, they’re free to pursue that without any interference. They can adjust the management structure and the capital size without much bureaucracy. This makes a partnership business potentially more flexible than a corporation company, with the ability to make decisions in the firm more quickly to changing circumstances.
9. Privacy
Compared to a limited company, it is not required for a partnership firm to publish its accounts. As a result, the affairs taking place in the business remain within the business and can be kept confidential by the partners. Since the partners carry out the business’s critical decisions, there is no chance of leakage of trade secrets. Thus, the firm’s privacy is maintained.
10. More business opportunities
Partnership in business means you are not only the one who is operating the business. Other partners are there with you who have exclusive ideas and concepts with them. When they work together, their unique ideas and perspectives get met and assist you in having a diverse outlook on an exact thing. This will help you develop border ideas for your product, services, organizational decisions, management, etc., and attract investors.
This huge coverage of innovative ideas, opinions, and analyses can add greater value to the firm’s operation. This helps free up time for you to explore more opportunities that come your way and removes the shortcoming of opportunity costs. It also gives you the ease and flexibility to pursue more business opportunities. Hence, having a partner brings more ideas to expand your business, make you more productive and increase your growth rate.
11. Risk sharing
Since, in a partnership firm, usually, the members agree to share profits and losses equally, all the members also share the risk. Consequently, in contrast to a sole proprietor, which brings unlimited liability, the burden of risk on each partner is much lower in a partnership business. Due to fewer loads, the partners are motivated to take up riskier projects with higher profit margins.
12. Long-Term Stability
Collaboration within a business partnership brings steady stability. You can help grow your business by employing one of your partners’ resources; this way, you can cut off your business expenses.
For example, if you are setting up to open a startup business with your partners, you can use one of your partners’ places first. This can ultimately help your business to decrease rental expenses. Hence the resources can also be utilized properly.
When partners collaborate, you can access varied knowledge, resources, and expertise, which will positively impact your business performance and stability. Moreover, together, they can arrange more considerable funds from their resources. The general partner also has varied good managerial and organizational skills, which will use for lasting expansion and efficiency.
13. Moral Support
Business can be a lonely game, particularly if you’re a solopreneur. You can feel isolated and overwhelmed when you get stuck in a challenge and deal with these circumstances alone. But having a prospective partner can make the experience much better. Partners being around assists in easing your everyday frustration occur in your business. Also, encourage you to work more effectively.
Well, it’s not just about dealing with frustrating situations. —Partners at times of celebration can make the moment more enjoyable. You feel pleased knowing you have someone at the workplace to celebrate your business success with. Hence, you’ll also be valued as a business companion.
Conclusion
Running a Partnership business creates greater value for your company. In business, very frequently, ‘two heads are better than one.’ The collective conclusion of debating a condition is far better than each partner could have attained individually. Having a partner means more access to skill sets, money, and shared liability.
So, it would be a better decision if you plan to establish a business with your partners. It would benefit you even if you’re a small business owner. If you need financial capital or more human, look for folks who can convey those assets to your business. Even it could be anyone, including an operating partner, to share the responsibilities or a set of limited partners ready to invest in your business in the hope of a potential return.
Ideally, you can find the right partner with a compatible personality. A person who shares a passion for the business and is willing to discuss the problems that arise along the way. Since when trusted partners work together, your business will more likely achieve its long-term goals.
Business Partnership FAQs
Can a minor become a partner in a partnership business?
Minors can be admitted into the business. A partner who is a minor, according to the law to which he is subject, might not be a partner in a firm. But, with the consent of all the existing partners, for the time being, they are only permitted to get the benefits from the partnership. They are not personally liable for any firm debts like the other partners.
Is registration of a partnership firm compulsory?
No! It is not obligatory to register a partnership firm. The Partnership Act of 1932 states that if the partners desire, they can register the business. Registration can be done with the help of the Registrar of Companies in the state where the main office firm is situated.
A partnership is simple to form as no weighty legal structure or formalities are involved. However, it’s better to register a partnership firm to avail of any legal benefits provided under the Partnership Act 1932. Otherwise, you’ll be deprived of it if the firm is unregistered.
What is the limit on the number of partners in a partnership firm?
A partnership business must have a minimum of 2 members and a maximum of 10 and 20 partners. Yet, currently, any partnership firm can have a maximum of 50 partners. According to the Companies act 2013, if the number of members exceeds fifty, it will become a company.
Can I register my office address as my residential address?
Yes! You can show your residential or rented home address as the company’s registered office address. In case you take place for rent, and the bills are in the owner’s name, then a ‘No Objection Certificate is needed.
