Making A Partnership for Rhode Island Small Businesses
The dedication of each owner to a shared vision in a Rhode Island Small Businesses, is the first step in starting a successful partnership. Each owner might have a different personal goal, but the company goals and direction should be consistent to take the best advantage of opportunities. As a team, owners are combining forces to react more quickly and efficiently to business opportunities. The partners must be very cautious of others and avoid creating unnecessary tension that can begin to erode the advantages of the partnership.
Based on our experience, it is often this tension between partners that can create additional challenges that can eventually result in the failure of the partnership and can even result in the failure of the business. Long and prosperous partnerships are not always necessarily fair ones; the partners, however, have a strong understanding that as a group they are more successful than they can be individually. The partners often take on very different roles within the business, which creates diversity and the opportunity for each partner to be personally successful.
Because partnerships are faced with the risk of losing partners or disagreements among partners, it is highly recommended that the parties involved do some additional planning to try to avoid challenges that can not only tear apart strong personal relationships but also tear apart the business itself.
Although we can see the value of open communication between owners, there also needs to be a leader and decision maker for specific judgments or specific tasks. It might be related to divisions, such as operations or sales, or it might be assigned as an overall responsibility to a specific partner. Other decisions may require the collaboration of partners’ opinions to come to an agreeable solution. It is often recommended that one partner or group of partners have a majority, at least 51 percent ownership, to avoid a deadlock on a decision. A deadlock can drain the energy from the partners and the business, causing obvious concern for the success of the business. If decisions cannot be made efficiently and with the trust of the partners, the business will have a difficult time maintaining a competitive edge.
Change is inevitable when it comes to business. All the planning in the world will not prepare you for the challenges that are created within a partnership. The understanding, commitment, and flexibility of the partners are what will determine the long term success of the partnership. Sales could fall short or exceed expectations, staff might change, or key operational components might change. When these dramatic events occur, the flexibility of the partners and the business might be the most important aspect of the partnership to lead the business in a new direction for success.
Creating the proper documents is a required step for a partnership to be successful and deal with changes that occur during the life of the partnership. Nearly all partnerships will go
through some kind of ownership change, and it is better to be prepared for the change rather than be reactive because your documents are not in order. Every year we consult with clients relating to changes to their partnership. These changes often involve family or close friends, and if the proper documents don’t exist, these partnership changes can create so much tension that they ruin the fabric of the family relationship or friendship. Take the steps needed to create the following documents.
Lucier CPA, Inc. 1308 Atwood Ave, Johnston, RI 02919 (401) 946-1900