We have heard a proverb, “Two heads are better than one”, which highlights that a problem can be solved more efficiently and effectively by two people as compared to one. This proverb also fits best in the business world, in which a partnership is considered better as compared to a sole proprietorship.
A partnership is said to be two or more than two people working together for a single purpose while owning a business in which the partners are equally responsible for the losses, profits, and risks related to the business.
You must be familiar with Microsoft, Facebook, Apple, Hewlett & Packard (HP), and Procter & Gamble (P&G), don’t you? Ever thought about the founders of these gigantic and top companies in the world? Well, surprisingly, they were all founded by partners, which later became successful examples of an effective business partnership.
Microsoft was founded by Paul Allen and Bill Gates, Facebook was founded by Mark Zuckerberg and the Winklevoss Brothers, Apple was founded by Steve Jobs and Steve Wozniak, HP was founded and named after Bill Hewlett and Dave Packard, and William Procter and James Gamble founded Procter & Gamble, which was also named after them.
As Helen Keller stated, “Alone we can do so little; together we can do so much.” These successful examples provide evidence of how two people can work together progressively in the business world. So, now you must be thinking about partnerships and their relatable information. Before that, it is important to know the basic elements and information regarding a partnership and its formation. In this article, we will discuss the formation of a partnership and useful information regarding it.
Here’s a glimpse of how you can easily set up an efficient, effective, profitable, and equitable partnership in your business.
- Select Your Partner
The first step to making a strong partnership is that you need to select your potential partner. It is necessary, because, after all, you are going to work together. So don’t rush, just you’re your take while selecting someone. Look for various factors such as skills, strengths, and potential. Prefer someone with a strong financial background who supports your goals and can be beneficial to the partnership, especially if you are running a small business.
- Decide On The Form Of Partnership You Want.
You know what; there are various kinds of partnerships that are practiced across the world. So, you need to be smart enough to ensure which kind of partnership is suitable for your business. Although the kinds of partnerships include limited partnerships, general partnerships, limited liability partnerships, and LLCs, Interestingly, each partnership has its own advantages and disadvantages. Moreover, just discuss it with your partner, whose kid partnership you think is the best for your company.
- Give Your Partnership A Unique Name
Well, after deciding on the form of a partnership, it’s time to use your creative skills to come up with a unique name for your partnership. The name of your partnership can be the name of your company, your name initials, or anything that you and your partner like. But, remember, it is necessary for you to ensure that the name that you choose isn’t available in the market or being used by another company. So, conduct your research regarding names and trademarks.
- Get Your Partnership Registered
After the initial steps, it is quite necessary for you to complete all the legal formalities pertinent to your partnership. Therefore, just register the name of your partnership business with the state. Remember, there are two kinds of partnerships: domestic and foreign. In terms of domestic partnerships, you get registered with your own local country, but if you own multiple branches in different countries, then get your partnership registered with each country.
- Consider Your Tax Responsibilities
Legally, it is quite important for you to manage the taxes of your business under the form of a partnership business. Each member of the business needs to file and pay their taxes on a regular basis.
- Get an EIN and Tax ID number
As you know, it is your responsibility to make sure you pay the tax on your partnership income and report to the government regarding your profit and losses. For that, you must obtain an employer identification number (EIN) and a tax ID number.
- Create Your Partnership Contract
As you know, there are certain duties, responsibilities, and liabilities that you need to distribute between you and your partners when forming a partnership business. Hence, to keep the legal formalities intact, you have to construct a partnership agreement. As it is a legal contract between you and your partner, it might help during a legal claim or fight. In such cases, obtain the help of a lawyer to ensure that the contact is drafted in accordance with the laws of the country read more on Lawrina.
- If Required, Then Get Licenses And Permissions
If there are certain restrictions implemented by your state municipal, then before conducting your partnership operations, you need to secure some specific licenses and permissions. It can be either sales tax permission, resale certificate, DBA license, or construction permit, depending on the kind of business you operate. Just contact your state or authorities to inquire regarding such information.
- Get Insurance
Therefore, it’s necessary to get a business liability insurance policy. As you already know, you and your partner are equally accountable for all the debt and liabilities. It will provide you with financial assistance in the event of any uncertain loss or mishap. Moreover, insurance will also help you during a legal claim and will safeguard your business and personal assets.
- Open An Account For Your Business
Lastly, just open a bank account for your business in order to separate the personal and business. This will help you manage your financial system and transactions. To open an account, you might need your EIN, partnership agreement, registered business name, and any important documents related to your business, depending on the requirements of your bank.
Thus, these are a few simple steps you need to consider before forming the desired partnership. Just follow them and conquer the dynamics of the business world!