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Should you consider adding a business partner?

On Behalf of | May 1, 2023 | Business Formations

Starting a business can be a challenging task, and it often requires a great deal of effort, resources, and planning. One of the critical decisions that entrepreneurs must make is whether to keep their business a sole proprietorship or a partnership.

While there are benefits to having a partner, there are some drawbacks to consider.

The pros and cons

The following are some of the advantages of having a business partner:

  • You have more financial power. One of the most significant advantages of having a partner is that they can provide additional financial resources. This extra capital can be helpful when starting a business or expanding it.
  • You can combine your talents. Different partners bring diverse skill sets, and together they can tackle critical business functions such as sales, marketing, production, and accounting.
  • You can share the potential risks. Starting a business typically involves considerable risk, and having a partner can help to mitigate that risk by sharing it. With two or more people involved, you are not solely responsible for bearing all the risks.

Here are some of the disadvantages to consider:

  • Having a business partner makes decision-making more complicated. Where multiple people are involved, each with their ideas, opinions, and ways of doing things, achieving consensus on critical decisions can be challenging.
  • You have less autonomy. While having someone share the risks is nice, it also means having to share authority over various aspects of the business. It can also become a source of contention. If one partner feels they are doing more work than the other or contributing more, tension can arise.
  • You may not stay oriented on the same goals. Even when partners are aligned initially, people and goals change over time. This can cause tension, especially when partners don’t have the same level of commitment or plans for the business.

Whether or not a business partnership is right will depend on the individual circumstances of the company involved. Conducting due diligence upfront and having open and honest communication with potential partners can help in making an informed decision. And, if you decide to move forward with it, be sure to have a legal partnership agreement to avoid future disputes.