The Pros and Cons of Having a Business Partner
Running a business can be a lot to handle for just one person. There are countless day-to-day tasks that are required when running a business. Sometimes, having a business partner seems like the best option to keep a business running smoothly. Continue reading to learn about the good and bad about having a business partner.
Pro: Extra Set of Hands
Having a business partner is helpful so that you are not forced to juggle dozens of tasks all on your own. When you have a business partner, you have someone who can help you with all of the business tasks. You can divide the work up evenly, which means it gets done more efficiently and no one has to feel overwhelmed.
Con: You Can’t Make Decisions on Your Own
One of the major downsides of having a business partner is having to run every decision by someone else. The decisions that are made by one partner affects all owners of that business whether they were aware of the choice or not. This may start to feel like an annoyance after a while.
Pro: Additional Knowledge
Partners can bring skills and knowledge about things you may not know much about. Your knowledge may be more based on the products, whereas your business partner may know more about the bookkeeping side of things. They may also be able to provide valuable lessons and knowledge from their past experiences.
Con: Potential Conflict
With each decision comes the possible threat of conflict. Even the friendliest of business partners will have disagreements and conflicts at times. In cases where the conflict is so major you can no longer work together, it is important to have a partnership exit strategy in place. This plan can help determine how responsibilities, profits, stocks, and other pieces of your business will be divided up.
Pro: Reduced Financial Burden
A major perk of having a business partner is having someone to share the costs of doing business with. Instead of having to fork over startup money all on your own, you have someone who can also contribute money, apply for loans, and carry some of the financial burdens owning a business can have.
Con: Shared Profits
When you own a business by yourself, you only have to share the profits with yourself. The same cannot be said for those in a business partnership. Depending on how many partners you have, your share may not be as big as you would like.
Pro: Less Paperwork
Starting a partnership is not particularly difficult. There is no federal paperwork you have to file, and only minimal paperwork to file on the local level. It is crucial to have a partnership agreement that is signed by all partners. This agreement covers the duties and responsibilities that each partner must follow as well as how decisions will be made and how profits will be divided amongst the partners.
Con: You are tied to the business
A partnership is not a separate legal entity like an LLC. You are legally tied to the other partners and the business. If any legal matters come up, you will not be considered separate from the business. If there are funds owed that the business cannot pay, debt collectors may come after you directly for payment.
Pro: Fewer Tax Forms
There are no additional taxes for business entities which means you won’t have to file taxes for your business. You can roll them directly into your own personal taxes as a business owner. You simply just include your share of profits and losses from the business.
Con: Individually Taxed
While having to file fewer tax documents is nice, there are also negatives to this. Typically, business taxes have lower rates than individual taxes. You may end up paying more individually than you would if you were to file taxes separately for your business.
Business partnerships are not for everyone. It is important to consider how well you work with others and what you are and are not comfortable sharing with others. It is also important that all of the partners involved are on the same page and have a thorough understanding of your business model.
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