Do You Need a Business Partner? How to Decide
Once you’ve decided on a great business idea, you’ll need to select a specific business structure. Although most business startups operate as sole proprietorships, many new businesses operate as general partnerships.
Starting a partnership comes with various costs and benefits. The best business partners will be able to evenly distribute work, fairly divide profits, and establish effective communication methods. On the other hand, some partners run into problems immediately, making their business less successful.
In this post, we’ll discuss some of the pros and cons of starting a business partnership so that you can decide if this is the proper business structure for you.
The Pros and Cons of Forming a Business Partnership
Pro: You Can Split the Workload and Time Commitment
Starting a new business venture typically requires a tremendous amount of work. In the early stages of creating a business, you’ll need to make significant decisions that will affect your company’s future.
Having a partner to split day-to-day tasks with can help you lessen the burden and ensure that nothing is forgotten.
According to the Tax Foundation, this is one of the many reasons more than 2 million partnerships are currently operating in the United States.
Con: Disagreements Will Happen
Although having a partner will help ease the burden of running your business, it could also create problems.
When you start a partnership, it’s essential to recognize that you and your partner won’t agree on everything. Whether you’re discussing your business name, logo, location, or the products or services you’re selling, being willing to compromise will be crucial.
If you want to make all decisions independently, a partnership probably isn’t the best option.
Pro: You Can Divide Tasks by Areas of Specialty
Every entrepreneur has some areas that they’re better at than others. Therefore, finding a business partner who is different from you can make it easier to run a successful business.
There are numerous ways that you and your business partner can divide your roles and responsibilities. You may want to consider having one person focus on big picture concepts (CEO) while the other handles accounting obligations (CFO).
Before selecting a small business partner, you should consider what the other person has to offer that you’re currently lacking. If you find someone who brings different skills to the table, having their expertise could make your business even more successful.
Con: Dividing Profits and Ownership Can Get Tricky
Many partnerships start well but become combative once issues with profits and ownership arise. There are several methods for dividing profits, including:
The number of hours you work
Your initial financial investment in the business
The revenue you generate for your company
The way you divide these areas will depend on the unique dynamics of your business, but this is certainly something that you should discuss with your partner before opening your business.
Pro: There Will Be Multiple Perspectives On Big Decisions
Even if you have a good idea for your business, it can be easy to get “tunnel vision” and overlook more essential details.
Having a business partner can help you gain a new perspective on what decisions you should make to grow your business. There may be an obvious source of conflict (legal, marketing, tech) that could get ignored without an additional set of eyes. Additionally, having someone else involved can help you feel more confident in your final decisions.
Con: Making Decisions May Take Longer
One of the most significant benefits of being a sole proprietor is that you can act very quickly. Without needing approval from partners, sole proprietors can make decisions without asking another person for their input. While having a partner certainly affords you the benefit of a new perspective, waiting for approval may hinder your ability to make swift decisions.
Conclusion: Partnerships Can Be Beneficial, But They Aren’t for Everyone
There are many pros and cons of starting a new business with a partner. The choice that is right for you will depend on your business’s long-term goals and overarching objectives.
Before selecting a business model, you should explore all the available options. By rushing to work with a potential business partner that you aren’t sure of, you could risk having to cut ties in the future. If you and your partner part ways, this could lead to issues for your business, including:
Getting bought out by them
Terminating the company entirely
Editor’s Note: This post was updated for accuracy and comprehensiveness in April 2022