Partnerships

Kekich Credo #63 - Never enter into a contract unless all parties benefit. But no partnership is ever 50/50. There will always be inequities.

A contract is a legally binding agreement between two parties.  A party to a contract is one who holds the obligations and receives the benefits of a binding agreement. 

There are three basic forms of business ownership.  They are sole proprietorship, partnership and corporation.  The benefit of a partnership over a sole proprietorship is that you will share the responsibilities, resources, and losses.  

A partnership is a relationship between two or more individuals that join together to carry on a trade or business.  Each partner contributes money, labour, property, or skills to the partnership.  Each partner is entitled to a share of the profits or losses of the business. 

Anyone entering into a business partnership with one or more partners should have a Partnership Agreement in order to formalize the terms and conditions of the business relationship.  Even if you are entering a partnership with friends or family members, a Partnership Agreement that dictates the way a business is run and details the relationship between each partner is very important.

The partnership agreement spells out who owns what portion of the business, how profits and losses will be split and the roles and duties of each party.  The agreement will also spell out how disputes are to be settled and what happens if one of the partners dies prematurely.  Other decisions that need to be agreed upon in the agreement include whether the partnership will end on a fixed date, what each partner will be contributing and the value of those contributions, as well how profit and loss will be distributed among the partners.  When will meetings be held, will votes be decided by the majority or unanimously, and will you be able to acquire new partners or not? 

There are advantages to a partnership.  Two heads (or more) are better than one.  More capital is available for the business and start-up costs are low.  You will have greater borrowing capacity.  It is easy to change your legal structure later if circumstances change.

The main disadvantage of a partnership is the fact that all individuals are liable together for the decisions, debts, and obligations of the partnership. Other disadvantages include the risk of disagreements and friction among the partners.  Each partner is liable for the actions of other partners. 

Inequality in a relationship refers to an imbalance of power between partners. No partnership will ever be 50/50 but each partner should benefit from the partnership.  Both partners should feel that you have a say in the relationship and that your opinion matters. Each one should get the opportunity to make decisions. As this credo statement says, never enter into a partnership unless there are benefits for both parties. 

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