The success of a business partnership can all come down to the simple decisions that are made along the way.
As well as ensuring that you have a well constructed business partnership agreement that protects all parties involved, there are various strategies a partnership can implement in order to reduce the potential for risks and improve future opportunities.
When first embarking on a business partnership there should be a shared sense of direction for the business future. Understanding what each partner expects from the partnership is vital when working to make those plans a reality through compromise and good business sense.
As time progresses it is easy to lose sight of your initial goals as you are focusing on the everyday running of the business. However, planning for the future is essential for business success and so it is important that you and your partners take the time to regularly discuss those aims, and what each of you is doing to actively pursue your ambitions for the business.
Planning for the future and staying on top of your finances go hand in hand. By taking on an accountant, partners are able to maintain an in depth knowledge of the business revenue, profits and losses without relying on their own financial acumen and risking mistakes. Alternatively, it may be that your business partnership is structured around one partners strengths focused on managing the business, while the other partners abilities and experience are in finance.
Whether you maintain your business finances yourself or have an accountant, it is up to the partners as managers of the business to make reliable estimates mapping out your annual revenue. This should take into account how and when money is coming in, and what is required to achieve your revenue expectations; the necessary outgoings such as marketing, resources and staffing needed to keep the business running.
Worst case scenario
There are many risks involved in running a business, particularly in a partnership with shared liability. A secure partnership agreement can protect partners when a worst case scenario occurs by putting provisions in place.
For example, the terms of a partnership agreement might include what happens to the business in the case of:
- A partner leaving the business; whether the partner retires, decides to leave or dies, without a partnership agreement the business is automatically subject to the terms of the Partnership Act 1890, which states that of a partner leaves the business is immediately dissolved.
- Shared liability; a partnership agreement allows business partners to put strict stipulations in place for the liability of each partner. For instance, in a limited liability partnership (LLP), partners are afforded the flexibility to agree from the beginning the capital each will contribute, the working hours each is expected to put in and the division of profit and loss. If the terms of an LLP are broken in any circumstance there are agreed upon measures in place to deal with the situation.
- Bankruptcy; If a partner files for bankruptcy and there is no partnership agreement in place, the business is automatically dissolved and all parties involved are jointly liable for the business debts. A partnership agreement can protect partners individual assets so that if one partner is forced to file for bankruptcy, it does not affect the financial situation of the remaining partners.
Building a secure business future
There are few predictable aspects in business and so it is crucial to protect your business and partners in the areas you can. Planning for the future, being financially astute and creating a partnership agreement tailored specifically to meet the nature of your business can go some of the way to securing your business success.
If you would like more information on how to get the best out of your business, the team at Ralli partnership law are experienced in helping a range of companies put together bespoke partnership agreements.
We cater for individual partner requirements in any organisation, and will help you draft an agreement that you are happy with. To find out more or get in touch with the team at Ralli, please contact us today on 0161 832 6131.