David McDonald
Contact West Carr & Harvey

Business partnerships – how do they work and what things should you consider?

Going into business together can be awesome. You get to have the benefit of shared control and management of the business with your partners. We have seen first-hand how like-minded people have come together to forge brilliant results.

By collaborating on a business venture, you have the opportunity to bring a variety of people with different skills together to achieve optimal benefit. You may be great with numbers and perhaps your mate Johnno has the people skills needed to manage staff and clients.

In a legal sense, there are many different types of business structures best suited for partnerships. The best structure for you will be entirely dependent on your individual circumstances and needs. We can assist and advise you on the best structure for you and your partner/s, but in the meantime here are some more practical aspects to think about when planning a business with other parties.

What’s your purpose and desired outcomes for the business?
Discuss your intentions early on (while you’re getting along well and haven’t had any business arguments yet!) and make sure all partners are on the same page. It’s best to get all stakeholders in agreeance early on to avoid any potential issues later.

Discuss both physical and financial responsibilities
Consider how each partner will contribute to the business – this includes cash investments, physical or intellectual property. If it doesn’t initially seem like an even spread, you may need to think about how each party member can become equal contributors. Also consider each of your business and personal strengths and make some decisions about who should be responsible for each aspect of the business.

Ongoing financial management
This is vital! Will you hire a bookkeeper or have one of the partners responsible for the management of profits, losses, expenses and cashflow? Be sure to have this covered off with us before you move forward.

Decision making
Who has the final say in the partnership on all major business decisions? If there is a disagreement, how will you make a decision? Will you take a vote or have a mediator? There will need to be a process in place to finalise decisions for the benefit of the business.

Partnership departure
A partner may choose to quit the partnership, or you may wish to help him along to leave! This is a distinct possibility, no matter how long you’ve been mates, so putting an agreement in place for how this would be managed is important. Much as we don’t like to talk about it, you will also need to allow for illness/disability or death of one of the partners and how their role in the business will carry on without them.

Succession planning
As we’ve said in the past, it is never too early to start your succession plan. It is well worth thinking about what you and your partners would like to do about one day selling or closing down the business when it’s time for you to finish up.