Partners and Partnerships
Using partnerships in business is an important decision, fraught with consequence. Depending on the arrangement and whom you choose as a partner or partners, partnerships can either be a blessing or a curse. In this article, we will address some of the forms partnerships take as well as the various qualities one should look for in a partner.
Taking a Share of the Business
If your company takes the form of a limited liability entity such as an LLC or a corporation, it is possible to sell shares of the business. Depending upon the arrangement, these shares would entitle the recipients to a percentage of the business profits. Once again, depending on the arrangement, shareholders may be entitled to cast votes regarding business decisions. It is also possible to have a single partner if both you and the partner are the only principle shareholders in a private company. Such a relationship may be bound by the rules and regulations of the business entity, rather than internal operating procedures defined by you and your partner. If the company is publicly owned, you will have little control over the type of people that become shareholders in your company. If it is privately owned, you will be able to choose shareholders carefully, and the rules to good partnerships will apply.
Risk and Reward
Other sorts of partnerships usually involve a formal agreement to share responsibilities, equity, loss, and profit. Usually, an operating agreement drawn up for a business entity such as an LLC is preferable to a partnership business entity which has its own set of stringent rules and regulations regarding business practices between you and any partners. Note that in any of these arrangements, there is a tradeoff taking place between risk and reward. The more of the business you own yourself, the more risk there is, but also more reward. You have taken on more responsibility for the business, but you will be entitled to a higher percentage of the profits. Likewise, if you accept more investors, partners, shareholders, or allow each to own a bigger stake in your business, you have spread the risk out, but you will be entitled to less of the profit. This is one of the ratios that you will have to consider when you accept the possibility of multiple owners in your business.
The Good, the Bad, and the Terrible of Partner Personality
The following is a list of important characteristics to consider when looking for a partner.
A good partner must be prepared to take responsibility. A potential partner that is quick to blame, probably also has trouble accepting responsibility for their actions. Partners must be prepared to be held accountable for both their successes and their failures. When they can admit their failures, they can learn for next time, and when they understand what has led them to success, they can continue the trend. Responsibility also necessitates the quality of following through on commitments, which is an important trait in any partner.
It is important for you and your partner to share values, concerns, and good common ground. It is not necessary for you to have everything in common, or even most things. There will be some issues, however, where you will want to be in concurrence. Your ideas about business growth, how to manage money, the business angle, and any social or religious responsibilities are all issues that you should have sorted out before you accept a candidate as a partner.
Although you may appreciate a partner with more enthusiasm than the ancient Greek philosophy demands, you will nevertheless benefit from a partner that can separate emotion from thought. You will have disagreements and arguments, but as long as you can settle your disputes in an intellectual manner, you will overcome any difficulties. Partners that are too given to indulgence in emotion may quickly become too unstable to work with or to resolve conflict with. They are also more apt to take disagreements personally, which leads to many problems.
Good communication is essential for any successful relationship, and partnerships are no exception. Optimally, you will want a partner that expresses themselves well with words. They should also have some awareness of how what they say affects others. The other half of communication is listening, and in this quality your partner should excel as well. The better they listen to your concerns, the better you will both be able to function as a team decision-making force!
5. Lack of Judgment
It is paramount for you and any potential partner to respect one another. A large portion of respect is to avoid judgment regarding the viewpoints of others. Having a nonjudgmental attitude will enable you to hear and to give opinions without the ordinary biases inherent in relationships. Mutual respect will lead to a better working relationship, which will eventually show results in the success of your business. And mutual respect is built upon an open-minded, nonjudgmental approach to relationships.
The more a partner wishes to be in control, the more problems you will encounter in dealing with that person and with running your business. Potential partners should be flexible and view compromise favorably. A partner that seeks control will be stubborn and you will have difficulty in reaching agreements and making joint decisions. Above all, partners should understand that it is inherent in the structure of a partnership that no one gets their way all of the time. If anyone should want total control, then a partnership is the wrong business form for them.
The Bond That Money Makes
Regardless of the exact form your partnership takes, it will be based in part on money. Far from an abstract concept, money is the tangible representation of opportunity, hard work, and security. Anyone that invests in your business or becomes a more direct partner, will have a stake in your enterprise. People will want a return on their money, and they will want to know that their money is wisely placed in your care. It is normal for people’s emotions to run high when their funds are at stake. You must be prepared to deal with the bonding that arises from the shared fate of each other’s money.