Often entrepreneurs prefer running their businesses individually to enjoy the maximum profits and make business decisions without any interference. However, the entrepreneur running the business without any help has a lot of responsibilities on his shoulders with an unlimited liability. The debate of sole proprietorship vs partnership businesses has long been on the table. The debate has taken a stir in recent times as entrepreneurship is becoming more popular than ever. This article explores the advantages of having a business partner and analyzes its impact on entrepreneurs and businesses.
Advantages of Having a Business Partner
Having a business partner means that the money will come from two people, instead of one. Therefore, it will be easier to raise money for the startup and other operations of the business. Adding a business partner brings a new network to the company which can be utilized for raising funds or for taking loans if needed. Furthermore, the liability is shared between the partners and the failure of the business will not fall on an individual’s shoulder. Having a business partner divides the costs and risks of the business amongst the members.
Often small businesses and entrepreneurs keep a small team to keep the costs low. But, a small team means that several responsibilities lie on one shoulder which can be stressful in the long-run. Having a business partner will allow the management and decision-making responsibilities to be shared among the partners. This will lower the burden on the entrepreneur. Also, employees and business processes need to be monitored for efficiency and effectiveness. The monitoring is not possible for one business owner as he has other personal and professional responsibilities as well. The business partners will share the responsibilities and take care of the work if one partner is not available.
Registration and Tax Benefits
A partnership has several legal benefits. Partnerships enjoy privileges with the Internal Revenue Service. The Internal Revenue Service treats a partnership as a pass-through entity and does not subject partnership to taxation. The business partners are taxed separately and the filling process is easier, with fewer formalities than a sole proprietorship. The business partners are taxed on the profits earned instead of the business. Also, partnerships do not have to pay high registration fees and save costs of the exorbitant legalities.
Skills and Talent Sharing
Different people have different expertise. Having a business partner means that two or more people with different experiences and expertise join heads to make the company a success. This creates a well-balanced pool of knowledge and skills coming from different minds. Although the balance may contract or complement, but shall be productive for the company. For example, a business by two partners with expertise in marketing and sales, and finance will have an edge over a sole proprietorship with expertise in one the fields. A partnership has better opportunities for growth and expansion, as it takes calculated risks and makes smarter decisions with discussions and negotiations between the partners.
Motivation and Support
Having a business partner means that two people are committed towards the vision of the company are willing to travel an extra mile for the project. However, an entrepreneur may lose hope and feel demotivated if the business is unable to make profits. He may take an impulsive decision during chaotic times such as downsizing or even closing the company. A business partner will keep the other motivated and hopeful with his constant support and guidance. When the one is hopeless, the other will keep him pumped. Therefore, partnership enjoys an aura of enthusiasm and hope.
Having a business partner has several benefits for the company. It helps to share the costs and responsibilities and offers the wisdom and expertise of two or more people. However, it demands the partners to be supportive, truthful and committed towards the company. There may arise situations that demand patience and forgiveness and the partners must be willing to make the effort.