About 80% of businesses fail within their first year of operation. One of the causes of this massive failure is a lack of an effective partnership strategy.
There are many things that you need to do to grow your business. In most cases, the business will be better off if there’s more than one person managing its operations. That’s why many business owners decide to create a partnership with their family members or friends.
Nevertheless, the partnership will only work if the partners develop an effective partnership plan. Here is how you can develop such a plan.
Partner Contributions
You need to determine the amount of money that each partner will contribute. The contribution can also be in terms of assets or skills.
It’s also ideal to state how future partners will contribute. Venerable.law can help you to come up with a fair contribution agreement.
Choose the Type of Partnership
There are many types of partnerships available today. Each of these partnerships provides different responsibilities for the partners.
For instance, you can choose a general partnership where all partners provide capital and are liable for the partnership’s debts. On the other hand, you can have limited partners who provide capital, but won’t be managing the partnership. In some instances, you can also go for equity partnerships where some partners receive salaries and others own equity.
Choose a Partnership Name
Next, you need to find a name for the partnership. Generally, the partnership type dictates the partnership’s name. For instance, limited liability partnerships usually show the limited liability in their name.
Your state may also have regulations about how you can name your partnership. Consequently, you should do some research before you choose the partnership’s name.
It’s a good idea to choose a partnership name that will always be evergreen. Selecting a name that may have to be changed is costly and time-consuming.
Registration
The next step in your partnership development is to register the partnership. Your state will have an online platform where individuals and partners can register their businesses. In addition, you can easily do the entire registration online.
A family limited partnership that offers services and products in multiple states must register in each state. You’ll start by registering in a primary state as a domestic entity. Then, your business can register as a foreign partnership in other states.
Partnership Agreement
Your plan should also set out the specific details of your partnership agreement. Each partner must take part in the drafting of the partnership. For instance, the agreement will specify the partnership’s decision-making process.
You should agree on how each process will take place. Moreover, the agreement must specify the particulars of the partnership health plan.
Taxation
You need to get a taxation number from the IRS. Fortunately, this is a process that you can complete on the IRS website. Alternatively, you can call the IRS to set up your employer ID number.
Launch Your Business by Creating a Partnership Plan
The partnership plan will guide the formation of your new partnership. It will also control the interaction between partners and customers. You can use the plan that we have outlined above to get started.
For more practical entrepreneurship tips, please read our other blogs.
