For many people, the thought of starting a new business is both exciting and nerve-wracking. On the one hand, being your own boss is a liberating feeling, but at the same time, you are responsible for everything that happens, especially if it fails. For that reason, many entrepreneurs are looking to start partnerships with others so that the burden of creating a new business is not on one person’s shoulders. Today we’re going to look at the pros and cons of doing things this way, as well as give you a brief partnership description.
What is a Partnership?
Legally speaking, this is when two or more people enter into an agreement that they will share the responsibility of the business. This is outlined in a partnership agreement, which can be either broad or specific regarding the details of who does what. In general, however, most partnerships are split based on who can provide the most resources, which can look something like 50/50 or 70/30. When filing for a business license as a partnership, it’s imperative that you both are on board with everything outlined in the agreement before you sign anything.
Pros of a Partnership
In many cases, having a partner or two can be a great thing. Most of all, the main benefit is that you can split responsibility and resources between you, thereby reducing the burden of any single member. Another primary reason to do things this way is that your starting costs are much lower than if you were starting an LLC or corporation. Finally, it can be easier to change your legal structure later on if necessary.
Cons of a Partnership
Overall, when entering into an agreement like this, you want to make sure that you and your partner are aligned and will work well together. Most of the time, bad things happen when each of you is trying to do different things, which can lead to a lot of problems over time. The primary disadvantage of a partnership is that you may be getting a cut of the profits while doing most of the work, or you may want to do one thing while your partner disagrees. Overall, clashes are the biggest reason to question the strength of a partnership.
In the end, if you plan well and find a partner that works, starting a business this way can be worthwhile and successful.
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