Partnership funding

What is partnership funding?

Generally, a partnership is a business owned by two or more individuals. There are three forms of partnerships: general partnership, joint venture, and limited partnership, check out Rules and Regulations to find out more about the legal details.

How does partnership funding work?

A successful small business partnership requires short-term mutual interest and long-term compatibility. You need compatible values and vision, compatible financial resources and expectations, and compatible goals. The best small business partnerships involve some give and take. But under the stress of building a new business, differences that at first seem quirky or even complementary can turn into major rifts. You and your small business partner don’t necessarily need to make an equal time commitment to the business venture, but you do need to know from the beginning what to expect from each other. Outline your expectations for your partner’s time so that you can identify any disparity between expectations and reality.

How can a partnership help me get money to fund my business?

You’ve heard a million times that “it takes money to make money.” When you’re in a small business partnership, that truth presents additional questions: Who will be contributing financially? How much capital will be expected from each partner? When does that investment have to be made? Keep in mind that while the specifics of who will contribute what financially are important to your partnership agreement, financial resources alone are not a worthwhile reason to bring in a small business partner.

What are some advantages of partnership funding?

All partners share in the profits, managerial responsibilities, and liability for debts equally. Your partner will help with the financial burden, decision making, workload to develop the business.

A partner will typically have better terms to provide “funds” for the business than a bank.

What are some disadvantages of partnership funding?

A partnership adds another opinion and say to decisions made for the business, which means you will no longer have full control and authority.

Pro Tip

Keep in mind that if financial capital is all your partner is bringing to the table, then he is not a business partner — that’s an investor. Make sure you understand the difference, and structure your business relationship accordingly.