Business Partners and Partnerships

A business partnership is the strategic alliance of two or more entrepreneurs working as partners to grow their small business. Partnerships also involve sharing the business' profits, losses and liabilities, as well as working together to optimize new marketing opportunities for the business.

There are two main types of business partnerships: traditional partnerships and limited partnerships. The main difference between an ordinary business partnership and a limited partnership is the level of partner involvement in the day-to-day running and control of the small business.

While both types of business partnerships assume full responsibility for any debts incurred by the business and share all profits equally, ordinary partners are also actively involved in running the business and developing new marketing opportunities. Limited partnerships, on the other hand, are more likely to have silent partners who distance themselves from the hands-on management of the business.

A verbal agreement is often all it takes to create a business partnership, although some form of written partnership agreement-  preferably a document formalized by a lawyer- is advisable. A legally binding partnership agreement can save your business time and money in the event of a partnership dispute, or even if the partnership ends amicably.

A typical business partnership agreement should include details of partners' rights and responsibilities, debt liabilities, profit share and the amount of capital invested by each partner in the small business. In addition, a partnership agreement might outline each of the partners' commitment to growing the business through developing new marketing opportunities, as well as their role within the partnership.

A business partnership should not be entered into lightly. Entrepreneurs entering into a partnership agreement need to be aware of the following limitations and obligations relating to partnership agreements.

All partners within a partnership are personally liable for all their business' debts and legal obligations, as well as answering any court judgments issued against the business.

Decisions about any deals or contracts relating to the business can be made by a single partner, without the agreement of the other members of the partnership. In addition, all individuals within a business partnership are liable for each other's debts incurred on behalf of the business.

Finding the right entrepreneur to join in a business partnership requires a great deal of time, thought and effort.

One option for entrepreneurs considering forming a partnership is to explore opportunities for joint marketing ventures with other businesses in a related product or service area. A restaurant, for example, could approach a local food producer, with a desire to create a partnership that would be equally advantageous to both.

Important questions to ask when selecting a prospective entrepreneur for a business partnership: