You may decide to start a small business with one or more partners. In a general partnership you and your partner will be the co-owners of the small business. When starting a small business with a partner be sure to issue a Partnership Agreement. This agreement will state each partner’s rights and responsibilities. Include in the agreement how decisions will be made if the partners can not agree in a particular argument. Also include the portion of profits/ losses for each partner. For example one partner may invest more into the small business so they may have a larger percentage of the profits.
Keep in mind that you never know how people will react to the stress of running a small business. Your once best friend may turn into Medusa when faced with the overwhelming stress and challenges of starting a small business. Make sure your partner is as confident and motivated about your small business idea as you are. Enter a partnership agreement with only someone you trust. Remember you will be liable for any decisions made by your partner/ partners for your small business. For example if someone sues your small business due to a decision made by your partner you can be held liable as well. Communication is essential in a Partnership; don’t make any major decisions with out consulting with your partner.
- Share expenses and losses
- Easy to set up
- Two or more heads are better than one
- Can lead to disagreements
- You are liable for decisions made by your partner
- No limited liability, however a general partnership can be easily formed into a Limited Liability Partnership in the future
- Your best friend can turn into Medusa