When you start a business, one of the first things you’ll need to do is decide on your business structure. It could be a sole proprietorship, a corporation, an LLC, or a partnership. A simple partnership often involves just two people who decide they can work successfully together to build a business. While partnerships can offer a sense of security compared to going it alone, it can have its drawbacks. This is why some partnerships fail.
Partners should complement each other with different skills and talents. If partners come from similar backgrounds or education, their skills may not be diverse enough.
Many partnerships fail because one partner puts in more work than the other. In some cases, partnerships fail because one partner FEELS LIKE he is working harder than the other. It is important to split and assign responsibilities so each is accountable.
One Partner Gets Distracted
Owning and operating a business takes commitment. It takes long hours and financial sacrifice. If one partner or the other feels like they have to supplement their income by doing outside projects, it can be the beginning of the end.
At some level, when you are in a partnership with someone, you are also in a partnership with their spouse and family. Be cautious if you don’t get along with a potential partner’s spouse. It could mean trouble ahead.
Fundamental Business Differences
It helps when both partners are on the same page when it comes to fundamental business goals and decisions. Where do profits go? How important is growth or expansion? What are your long-term goals? Of course, all this needs to be addressed before going into business together.
Starting, building, and maintaining a successful business can be a huge challenge. While having a business partner beside you can be reassuring, make sure you are compatible and that each of you brings something unique to the table. A failed partnership can be a financial disaster and damage relationships forever.
One thing you should be able to agree on is business insurance, including life insurance for each partner. Our independent business insurance professionals can help. We’ll discuss your goals and potential risks. We can help design a business insurance plan, especially for your organization. Reach out to us today.