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From Startup to Success: How to Establish and Grow Your Partnership Business
Although standing shoulder to shoulder with the same group of entrepreneurs, not many aspiring business owners share the same ideology. While a partnership model might not be one’s cup of tea, it could be the pick of the litter for others to take their businesses to new heights.
If you have landed on this blog post because this distinct business structure has caught your attention, this short but jam-packed guide from us could be the solution you are looking for to dabble in a new venture.
With that being said, if you’re seeking foundational knowledge on how partnership businesses work, this blog post provides an unbiased perspective on the essentials.
Without further ado, we will get right into the main event.
Everything You Need to Know about Partnership Business
What is a Partnership Business?
A partnership business is an arrangement where two or more parties join together to run a joint business. Each party often possesses its ownership and management responsibilities, as concurred beforehand in an agreement.
In order for a partnership business to form, each partner is set to contribute resources that add to the mutual benefits of all parties, be it labor, skill, capital, or property. In return, everyone will receive an agreed-upon profit amount and share the losses of the business.
The types of partners are not limited to qualify for a partnership model. Partners can be individual merchants, corporations, or professionals in fields like law or medicine. As long as their visions and goals align, different types of business owners can take part in a partnership allegiance.
Starting a partnership business calls for a specific area of knowledge that entrepreneurs ought to get familiar with before getting a head start.
Similar to other business models, one can certainly start an eCommerce partnership business. In the virtual world, having a reliable host platform like Shopify is a cheat code for finding compatible business partners that bring the best out of you. With programs namely Shopify Plus Partners, online merchants are connected with professional, trustworthy service providers who double as potential future partners. If you are a part of the eCommerce hustler crowd, starting a Shopify partnership business could be the move you need for your brand to flourish.
Types of Partnership Business
A partnership business is an umbrella term that encompasses several business types. While both parties will work together under the same principles and covenant, there are types of partnership that simply will match better with you than others. Our picks for the most common types of partnership business below will give you an idea of which way to go.
- General Partnership (GP)
This is the go-to approach for many business owners who are dipping their toes into the partnership model for the first time. In this structure, all parties are responsible for a set amount of work, liability, and overall management duty of the business.
Since this type puts emphasis on equality, all partners will consequently be in charge of the debts and losses of the business as a whole. This operation results in every party’s assets being used to settle business activities, even those in which they do not take part.
This feature poses a considerable risk for those who are in this type of partnership, where legality can potentially become complex. That said, since the nature of the general partnership is pretty simple and straightforward, a major number of rookie entrepreneurs still opt for this method.
- Limited Partnership (LP)
A limited partnership consists of the roles of both general and limited partners. While general partners have full responsibility and liability for the business, limited partners are protected from being liable for the business activities. In this case, only their contributions (i.e. capital) to the business are subjected to legal claims, while their personal assets are impervious.
As a result, individuals who seek a more hands-off, lenient position in a business can utilize this type of partnership while still receiving profits without the hefty legal risk.
Learn more: How to Become an eCommerce Expert for Shopify [2024]
- Limited Liability Partnership (LLP)
By taking the limited partnership up a notch, we will arrive at another well-loved option: a limited liability partnership (LLP). In this operation, all parties assume the role of limited partners. This means each partner will be responsible for their contributions, not the debts and activities of the whole business when it comes to legal claims. Should there be a time when one partner is caught up in the middle of a legal action, the personal assets of the other partners will be safe and sound (in most cases).
Since this structure offers a secured layer of protection for all parties, LLP is often crowned as a safe bet for professionals in the fields of medicine, accounting, law, and real estate.
- Joint Venture (JV)
A joint venture (JV) refers to a business agreement between two or more parties to work towards a common goal that often comes with an explicit deadline. Since the partnership is temporary, a JV is considered to be a project-specific arrangement, rather than a business association. Partners in a JV commonly share the expenses, financial risks, and ultimate rewards. You would often see a blend of large corporations and startups, as well as complementary businesses that have made use of this tactic.
Pro tip: To kick start, choose a partnership type that matchs your long-term goals. For equal collaboration, consider a General Partnership (GP). For limited personal liability, an LLP might be better. For short-term projects, a Joint Venture (JV) is ideal
Pros and Cons of a Partnership Business
With the partnership model, you are not a lone wolf. It is not feasible to assess whether maintaining a solo or a partnership business is better. However, we can trust the good ol’ pros and cons method to thoroughly weigh the advantages and disadvantages of this business approach before jumping the gun. No need to scour the internet for an answer, we have compiled a list for your consideration right below.
Properly weighing the good and bad of this business model is the key to successfully taking advantage of this business arrangement.
|
Pros |
Cons |
|
Easy to set up and establish, suitable for business owners at all stages |
Possible internal conflicts between partners due to different work ethics |
|
Pooled resources, which grant partners access to more capital |
Personal assets at risk in a general partnership |
|
Shared responsibility in management duties, decision-making, and burden |
Potential lower profits due to the equal division between partners |
|
Access to a wide spectrum of expertise from other partners |
Limited control over the business activities among other partners |
|
Partner’s liability is protected under certain partnership types and with a proper agreement |
Requires careful tax filings for all partners in order to stay compliant with the regulations |
|
Opportunities to network through partners’ leads |
Risk of dependency between partners |
|
More credibility to employees and other business partners |
|
|
Faster return on investment |
Looking at the good and bad of a partnership, it is evident that no matter how foolproof we think a business method is, it can never be perfect without vigilant planning and evaluation. By taking preemptive measures, there is a better chance of preventing these risks from affecting your future business.
Learn more: How to Sell Affiliate Products On Shopify — Apps & Pro Tips [2024]
General Process to Start Your Partnership Business
Starting a partnership business is similar to building your own brand in some way, but there are certain steps that require extra regard to reach a satisfactory outcome.
We have gone over the common types, as well as the pros and cons of a partnership business. If this option strikes you as a lucrative business structure, it is time to learn how to start a partnership in 5 simple steps.
Not everyone can match your business goals, that is why it is imperative to do extensive research to pick out a compatible partner. The criteria you should look for are the complementary skillset, experience, industry reputation, and resources that coordinate with your brand. Outlets to scour for potential partners are networking events, online business platforms, and referrals.
Reach out to your potential candidates via messages, emails, meetings, contact forms, or phone calls to initiate communication. If the conversion advances, make sure to have an outline that depicts your vision clearly at your disposal. The first impression is vital in achieving further connection.
Once mutual interest is established, this is the golden time to get your priorities across to your partner. Go over the responsibilities, business structure, ultimate objectives, perks, financial situation, and the like that you have in mind. Make sure to be as detailed and clear as possible.
A partnership agreement is the next step in moving closer to owning a joint business with your chosen partner. This is also a crucial checkpoint since it covers each party’s liability, profits, commitment, legal responsibility, and other management duties. Have the final agreement reviewed by a legal professional to prevent mishaps for both parties.
The last step is the home stretch in materializing your partnership business. Similar to a solo venture, you will be going through the process of picking and registering a business name, acquiring necessary permits, taking care of the legal aspects, and completing tax registration.
Once you have closed the deal on the last step, the grind has only just begun. How you and your partner handle the shared responsibilities in the long haul will be the most solid testament to how accurate your pick is. In the meantime, what is better than following the footsteps of the veterans who have been playing the game for years? Scroll down for real-life examples of brands that have seen success in their partnership businesses.
Examples of Successful Partnership Businesses
Starbucks and Pepsi Co.
Starbucks and Pepsi Co. make a great duo when it comes to sharing mutual benefits.
Starbucks and Pepsi Co. established their fruitful partnership 30 years ago. What started out as a 50/50 joint venture in 1994 mushroomed into the invention of multiple Starbucks coffee drinks, which are delivered by Pepsi Co. to a wide array of retail stores. This collaboration not only focuses on the development of Starbucks’ read-to-drink beverages but also reflects both parties’ excellent compatibility in doing business. Essentially being competitors in the same niche at first, the two giants have found a common interest and managed to capitalize on it. The result is booming growth in the beverage industry and a sturdy decade-long partnership.
GoPro and Red Bull
These two giants have been partners for multiple global campaigns, proving the efficiency of this partnership.
These two companies from different industries have proven to be a match made in heaven when they decided to partner up in 2016. With a shared interest in producing immersive experiences, GoPro and Red Bull made a pact to join forces on a multi-year collaboration with a focus on product innovation and high-energy content creation. By integrating GoPro's state-of-the-art camera technology with Red Bull’s media production, the partners have established a platform for dedicated audiences and adrenaline chasers. Instead of existing side-by-side like they used to, the two companies are now boosting their brand visibility and customer engagement organically.
McDonald’s and Coca-Cola
This classic combination is how most people remember when sitting in a McDonald’s restaurant.
McDonald’s is one of the household fast food chains, while Coca-Cola’s reputation is recognized worldwide. These two brands make a dynamic duo that an everyday person can spot from miles away, that is why it has been standing proudly since 1955. What the fast food industry looks like now is the direct result of this long-lasting partnership.
By being the exclusive soft drink provider for McDonald’s, Coca-Cola has managed to reinforce its presence among customers. In return, the famous fast food brand received a staple menu item and consistent product quality, which significantly enhanced its brand image. The two companies both benefit from each other’s marketing campaigns and secure a solid customer base worldwide. This simple yet impactful partnership has set a benchmark on how brand collaboration should look, especially in the food and beverage sector.
Handy Tips to Jumpstart a Successful Partnership Business
In true GemPages fashion, we can’t close a blog post without providing you with useful tips and tricks to guide you through the process of starting a prosperous partnership business.
Pro tip: GemPages is building a network of CRO and development experts, agencies, and freelancers. By joining this marketplace, you get the opportunity to expand your reach and work with Shopify merchants. This is a great time to join the force in the early phase of the program.
Fill out this short form to submit your application.
Establish a Mutual Understanding of Roles and Responsibilities
Though there are existing partnership types to go with, the nitty-gritty of each agreement depends largely on all parties’ mutual understanding. If things go smoothly on the first try, great! But we get how confusion can emerge at any stage of forming a business, especially when the partners have not had enough time to become familiar with each other’s work ethics. Furthermore, working with international partners poses another hurdle to the language barrier.
With all that being said, taking the initiative to communicate the roles and responsibilities of all sides cannot be understated. From the first draft of your agreement, these factors should be made abundantly clear. Along the way, you can make adjustments based on each partner’s strengths and skillset to maximize your business performance. By being explicit from the get-go, future conflicts can be avoided.
Develop a Thorough Business Plan
Developing a business plan as a solo entrepreneur is a challenging task in itself. Now, with a partner, it is crucial to allow yourself a generous amount of time to get this nailed down before acting on it. Be sure to touch on facets like mutual objectives, target audience, management roles, pooled capital, branding and marketing, risk handling, and so on. Your partner will not be on the same page with you on all of the suggested aspects, thus, it is even more vital to lay them all on the table to ensure a frictionless workflow later on. After all, a business plan cannot portray your brand perfectly in one go. That is why your partner’s input is the cornerstone in getting closer to a long-lasting partnership.
Prepare for Conflict Resolution
No matter how meticulous you are with your operation, clashes are bound to happen in a multi-partner business. What you can do is prepare yourself by mapping out a conflict resolution plan proactively. Here are the recommended approaches to minimize conflict in this type of business structure:
- Encourage transparent communication: set up a healthy and open working environment where everyone can feel comfortable voicing their opinions
- Review roles and responsibilities regularly: leave no room for confusion and ensure tasks are done by the respective person
- Establish a conflict resolution strategy: include this strategy in your business plan, as well as have a mediator to resolve difficult conflicts if needed
Over to You
Before embarking on such a byzantine endeavor as a partnership business, aspiring entrepreneurs ought to make sure that they have exhausted all helpful resources to have proper preparation. Thus, commerce and marketing outlets like GemPages are always available to give you a helping hand in diversifying your business venture. Since this is not a solo feat, the chosen partner, business structure, and overall direction you wish to steer your brand to will gravely impact the future of your business. Now let’s go out there and pave the way for your business to take off.
FAQ about Partnership Business
