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Crafting an Effective Partner Business Plan: Essential Elements for Success

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Partner Business Plans: Key Elements

The Crucial Role of Business Plans in Law Firm Partner Success
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The Importance of a Great Business Plan

Professional Goals For Partner Status

Making an evaluation of your existing practice, describing your vision as a partner, creating a strategy for growth.

A partner's fit culturally
The viability of a partner's practice for the long-term
A partner's record of excellent client service to long-term clients and producing business
A partner's history of consistently increasing collections
A partner's practice fit in connection with the firm's strategic plan for expansion
Whether a partner's practice area is one that is targeted for growth
Whether the partner brings portable business and/or specific expertise needed in a particular practice area
The opportunities the partner would bring for business development and significant cross-selling were the partner to join the firm
Whether the partner's historical information is reflective of consistent productivity
Whether the partner's client base fits within the firm's client structure
Any potential conflicts that would preclude the firm from hiring the partner
A partner's current compensation and compensation expectation
A partner's potential contribution to the firm's bottom line/profitability
A partner's fit within the firm's current attorney roster
A partner's reason for leaving his or her current firm (voluntary/mutual arrangement) and whether the partner would be a problem
Creative: Serve as a marketing piece on the partner and enable the firm to assess the partner's business potential. It should also provide an outlet to the partner to step out of the resume format and chart his or her previous performance and future prospects for business in a creative format.
Illustrative: Illustrate to a firm that the partner is thinking about his or her practice as a business and set forth his or her plan for the future.
Persuasive: Persuade the firm to hire the partner.
Historical: Chart a historical record of the partner's history of creating business opportunities and his or her ability to develop and foster client relationships over an extended period of time.
Demonstrative: Demonstrate a partner's business-development skills, initiative, and ability to contribute not only to his or her own success but also to the success of his or her colleagues through cross-selling efforts. It should also demonstrate ways a partner can contribute to a firm's financial bottom line, enhance its practice-group development, and ultimately bring added value to the team.
Prophetic: Prophesy what the partner believes he or she will be able to accomplish in his or her practice and for the firm in the short and long term.
Preparatory: Prepare the partner for the interviewing process.

Introduction

Provide a narrative including professional history, practice overview, and a description of areas of expertise. This section may highlight briefly particular areas of expertise that the firm does not currently have.
Describe the partner's role historically as a business developer.
Briefly touch upon why the partner believes he or she would be a good fit for a particular firm.

Market Research/Analysis

Give analysis of local need for services in partner's practice area.
Describe local competition/other law firms with similar practices.
Give overview of need in local market for partners with his or her expertise.
Describe why partner believes firm provides the best platform in the marketplace for his or her particular practice area.

Current Client Base

Describe current portable clients (use generic or specific).
Describe key industries serviced.
Discuss other partners' clients partner is servicing.

Additional Contacts to Develop

Discuss contacts not yet tapped.
Given market analysis, project possible targets in local, regional, national, or international markets.
Discuss possible expansion of business from current client base.

Cross-Selling Opportunities

Describe cross-selling opportunities with current clients.
Describe cross-selling opportunities with known key clients of prospective firm.
Discuss other practice areas at current firm to which partner is delegating work.
Discuss services your clients are requesting that you cannot currently service at your firm and could otherwise capture at the new firm .

Other Business-Development Sources

Describe additional business contacts you are pursuing or plan to pursue
Speeches, publications
Community organizations
Bar associations
Internal marketing initiatives
Client seminars/newsletters

Long-Term Strategy Goals and Targets

Set targets for expansion of practice in terms of collections, attorneys, and clients/industries.
Consider possibility of local to regional to national growth patterns.
Consider growth in other key competencies which may be affected by partner's long-term success.
Discuss long-term strategies in connection with firm's overall strategic plan and practice-group development plans.

Historical Collections, Billing Rates, and Billable Hours

If a partner with a lower billing rate structure, chart the anticipated rate increases by portable client or anticipated timeline for rate increases to current clients. Discuss any alternative billing arrangements you currently have in place with clients.
Include three-year client collections history by client (as originating attorney and as billing attorney on other attorneys' matters). Include projection for current fiscal year.
Include three-year billing rate history.
Include three-year historical compensation history (including bonus information).
Include three-year billable hour history.
Note pending projects contributing to future collections.
Include a summary of anticipated collection projections for the next three to five years.
Business-development budget
Time commitments from partners in other practice areas for cross-selling purposes
Key staff needed (secretary, paralegals, etc.)
Foreign-language skill requirements
Travel expenses
Marketing materials, presentations, etc.

Creative Conclusion

Recap key points in plan, added value partner brings, and reasons he or she would be a good fit.
Emphasize flexibility of plan and eagerness and willingness to discuss and modify in accordance with firm's plans and objectives.
See 30 Ways to Generate Business as an Attorney for more information.

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Harrison also does a weekly free webinar with live Q&A for law firms, companies, and others who hire attorneys each Wednesday at 10:00 am PST. You can sign up for the weekly webinar here: Register on Zoom

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Harrison Barnes is the legal profession's mentor and may be the only person in your legal career who will tell you why you are not reaching your full potential and what you really need to do to grow as an attorney--regardless of how much it hurts. If you prefer truth to stagnation, growth to comfort, and actionable ideas instead of fluffy concepts, you and Harrison will get along just fine. If, however, you want to stay where you are, talk about your past successes, and feel comfortable, Harrison is not for you.

Truly great mentors are like parents, doctors, therapists, spiritual figures, and others because in order to help you they need to expose you to pain and expose your weaknesses. But suppose you act on the advice and pain created by a mentor. In that case, you will become better: a better attorney, better employees, a better boss, know where you are going, and appreciate where you have been--you will hopefully also become a happier and better person. As you learn from Harrison, he hopes he will become your mentor.

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Improving the management of complex business partnerships

Partnerships never go out of style. Companies regularly seek partners with complementary capabilities to gain access to new markets and channels, share intellectual property or infrastructure, or reduce risk. The more complex the business environment becomes—for instance, as new technologies emerge or as innovation cycles get faster—the more such relationships make sense. And the better companies get at managing individual relationships, the more likely it is that they will become “partners of choice” and able to build entire portfolios of practical and value-creating partnerships.

Of course, the perennial problems associated with managing business partnerships don’t go away either—particularly as companies increasingly strike relationships with partners in different sectors and geographies. The last time we polled executives on their perceived risks for strategic partnerships, 1 Observations collected in McKinsey’s 2015 survey of more than 1,250 executives. Sixty-eight percent said they expect their organizations to increase the number of joint ventures or large partnerships they participate in over the next five years. A separate, follow-up survey in 2018 showed that 73 percent of participants expect their companies to increase the number of large partnerships they engage in. the main ones were: partners’ disagreements on the central objectives for the relationship, poor communication practices among partners, poor governance processes, and, when market or other circumstances change, partners’ inability to identify and quickly make the changes needed for the relationship to succeed (exhibit).

In our work helping executive teams set up and navigate complex partnerships, we have witnessed firsthand how these problems crop up, and we have observed the different ways companies deal with them . The reality is: successful partnerships don’t just happen. Strong partners set a clear foundation for business relationships and nurture them. They emphasize accountability within and across partner companies, and they use metrics to gauge success. And they are willing to change things up if needed. Focusing on these priorities can help partnerships thrive and create more value than they would otherwise.

Establish a clear foundation

It seems obvious that partner companies would strive to find common ground from the start—particularly in the case of large joint ventures in which each side has a big financial stake, or in partnerships in which there are extreme differences in cultures, communications, and expectations.

Yet, in a rush to complete the deal, discussions about common goals often get overlooked. This is especially true in strategic alliances within an industry, where everyone assumes that because they are operating in the same sector they are already on the same page. By skipping this step, companies increase the stress and tension placed on the partnership and reduce the odds of its success. For instance, the day-to-day operators end up receiving confusing guidance or conflicting priorities from partner organizations.

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How can the partners combat it? The individuals expected to lead day-to-day operations of the partnership, whether business-unit executives or alliance managers, should be part of negotiations at the outset. This happens less often than you think because business-development teams and lawyers are typically charged with hammering out the terms of the deal—the objectives, scope, and governance structure—while the operations piece often gets sorted out after the fact.

Transparency during negotiations is the only way to ensure that everyone understands the partners’ goals (whether their primary focus is on improving operations or launching a new strategy) and that everyone is using the same measures of success. Even more important, transparency encourages trust and collaboration among partners, which is especially important when you consider the number of executives across the organizations who will likely rotate in and out of leadership roles during the life of the relationship.

Inevitably, points of tension will emerge. For instance, companies often disagree on financial flows or decision rights. But we have seen partners articulate such differences during the negotiation period, find agreement on priorities, and reset timelines and milestones. They defused much of the tension up front, so when new wrinkles—such as market shifts and changes in partners’ strategies—did emerge, the companies were more easily able to avoid costly setbacks and delays in the business activities they were pursuing together.

Nurture the relationship

Even business relationships that start off solidly can erode, given individual biases and common communication and collaboration issues. There are several measures partners can take to avoid these traps.

Connect socially

If executives in the partner organizations actively look for opportunities to understand one another, good collaboration and communication at the operations level are likely to follow. Given time and geographic constraints, it can be hard for them to do so, but as one energy-sector executive who has negotiated and managed dozens of partnerships noted, “It’s important to spend as much time as you can on their turf.” He says about 30 to 40 percent of partnership meetings are about business; the rest of the time is spent building friendships and trust.

Keep everyone in the loop

Skipping the step of keeping everyone informed can create unnecessary confusion and rework for partner organizations. That is what happened in the case of an industrial joint venture: the first partner in the joint venture included a key business-unit leader in all venture-related discussions. The second partner apprised a key business-unit leader about major developments, but this individual did not actually join the discussions until late in the joint-venture negotiation. At that point, as he learned more about the agreement, he flagged several issues, including inconsistencies in the partners’ access to vendors and related data. He immediately recognized these issues because they directly affected operations in his division. Because he hadn’t been included in early discussions, however, the partners wasted time designing an operating model for the joint venture that would likely not work for one of them. They had to go back to the drawing board.

Recognize each other’s capabilities, cultures, and motivations

Partners come together to take advantage of complementary geographies, corresponding sales and marketing strengths, or compatibilities in other functional areas. But it is important to understand which partner is best at what . This process must start before the deal is completed—but cannot stop at signing. In the case of one consumer-goods joint venture, for instance, the two partner organizations felt confident in their plan to combine the manufacturing strength of one company with the sales and marketing strengths of the other. During their discussions on how to handle financial reporting, however, it became clear that the partner with sales and marketing strengths had a spike in forecasting, budgeting, and reporting expertise. The product team for the first partner had originally expected to manage these finance tasks, but both partner teams ultimately agreed that the second partner should take them on. In this way, they were able to enhance the joint venture’s ongoing operations and ensure its viability.

Equally important is understanding each partner’s motivation behind the deal. This is a common point of focus during early negotiations; it should continue to be discussed as part of day-to-day operations—particularly if there are secondary motivators, such as access to suppliers or transfer of capabilities, that are important to each partner. Within one energy-sector partnership, for instance, the nonoperating partner was keen to understand how its local workforce would receive training over the course of the partnership. This company wanted to enhance the skills of the local workforce to create more opportunities for long-term employment in the region. The operating partner incorporated training and skill-evaluation metrics in the venture’s quarterly updates, thus improving the companies’ communication on the topic and explicitly acknowledging the importance of this point to its partner.

Invest in tools, processes, and personnel

Bringing different business cultures together can be challenging, given partners’ varying communication styles and expectations. The good news is that there are a range of tools—among them, financial models, key performance indicators, playbooks, and portfolio reviews—companies can use to help bridge any gaps. And not all these interventions are technology dependent. Some companies simply standardize the format of partnership meetings and agendas so that teams know what to expect. Others follow stringent reporting requirements.

Another good move is to convene an alliance-management team. This group tracks and reviews the partnership’s progress against defined metrics and helps to spot potential areas of concern—ideally with enough time to change course. Such teams take different forms. One pharmaceutical company with dozens of commercial and research partnerships has a nine-member alliance-management team charged mostly with monitoring and flagging potential issues for business-unit leaders, so it consists of primarily junior members and one senior leader who interacts directly with partners. An energy company with four large-scale joint ventures has taken a different approach: its alliance-management team comprises four people, but each is an experienced business leader who can serve as a resource for the respective joint-venture-leadership teams.

Sometimes partnerships need a structural shake-up—and not just as an act of last resort.

How companies structure these teams depends on concrete factors—the number and complexity of the partnerships, for instance—as well as intangibles like executive support for alliances and joint ventures and the experiences and capabilities of the individuals who would make up the alliance-management team.

Emphasize accountability and metrics

Good governance is the linchpin for successful partnerships; as such, it is critical that senior executives from the partner organizations remain involved in oversight of the partnership. At the very least, each partner should assign a senior line executive from the company to be “deal sponsor”—someone who can keep operations leaders and alliance managers focused on priorities, advocate for resources when needed, and generally create an environment in which everyone can act with more confidence and coordination.

Additionally, the partners must define “success” for their operations teams: What metrics will they use to determine whether they have hit their goals, and how will they track them? Some companies have built responsibility matrices; others have used detailed process maps or project stage gates to clarify expectations, timelines, and critical performance measures. When partnerships are initially formed, it is usually the business-development teams that are responsible for building the case for the deal and identifying the value that may be created for both sides. As the partnership evolves, the operations teams must take over this task, but they will need ongoing guidance from senior leaders in the partner organizations.

Build a dynamic partnership

Sometimes partnerships need a structural shake-up—and not just as an act of last resort. For instance, it might be less critical to revisit the structure of a partnership in which both sides are focused on joint commercialization of complementary products than it would be for a partnership focused on the joint development of a set of new technologies. But there are some basic rules of thumb for considering changes in partnership structure.

Partner organizations must acknowledge that the scope of the relationship is likely to shift over time. This will be the case whether the partners are in a single- or multiasset venture, expect that services will be shared, anticipate expansion, or have any geographic, regulatory, or structural complexities. Accepting the inevitable will encourage partners to plan more carefully at the outset. For example, during negotiations, the partners in a pharmaceutical partnership determined that they had different views on future demand for drugs in development. This wasn’t a deal breaker, however. Instead, the partners designated a formula by which financial flows would be evaluated at specific intervals to address any changes in expected performance. This allowed the partners to adjust the partnership based on changes in market demand or the emergence of new products. All changes could be incorporated fairly into the financial splits of the partnership.

Avoiding blind spots in your next joint venture

Partners should also consider the potential for restructuring during the negotiation process—ideally framing the potential endgame for the relationship. What market shifts might occur, how might that affect both sides’ interests and incentives, and what mechanisms would allow for orderly restructuring? When one oil and gas joint venture began struggling, the joint-venture leader realized he was being pulled in opposing directions by the two partner companies because of the companies’ conflicting incentives. “It made the alliance completely unstable,” he told us. He brought the partners back to the negotiation table to determine how to reconcile these conflicting incentives, restructure their agreement, and continue the relationship, thus avoiding deep resentment and frustration on both sides of the deal.

Such dialogues about the partnership’s future, while potentially stressful, should be conducted regularly—at least annually.

The implementation of these four principles requires some forethought and care. Every relationship comes with its own idiosyncrasies, after all, depending on industry, geography, previous experience, and strategy. Managing relationships outside of developed markets, for instance, can present additional challenges involving local cultures, integration norms, and regulatory complexities. Even in these emerging-market deals, however, the principles can serve as effective prerequisites for initiating discussions about how to change long-standing practices and mind-sets.

An emphasis on clarity, proactive management, accountability, and agility can not only extend the life span of a partnership or joint venture but also help companies build the capability to establish more of them—and, in the process, create outsize value and productivity in their organizations.

Ruth De Backer is a partner in McKinsey’s New York office, where Eileen Kelly Rinaudo is a senior expert.

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Have the Same Vision

Define Roles

Choose the Right Structure

Anticipate disputes, spell out financial responsibilities.

Plan for How to Get Out

Hold Partner Meetings

Revisit the agreement as you grow, the partnership agreement, frequently asked questions. (faqs).

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Partnerships are a simple way for two or more people to own a business together. There are several types of partnerships that differ in terms of who is liable for debts and lawsuits. You may want to form a partnership to test a business idea before committing to a more formal business structure.

There are quite a few issues you should address with your prospective partner before forming a partnership. Attend to these issues before you start, and you have a better chance of a successful venture.

Key Takeaways

A partnership is a business structure that involve two or more people who are in business together.
A successful partnership starts with partners who have the same vision for the business.
As you create your partnership you should define roles, spell out financial contributions and pay, decide what happens when you have disputes, and discuss what happens when one or all parties want to end the partnership.
Continue to revisit your partnership agreement as your business grows.

For a partnership to be successful, all parties involved should agree on the same strategic direction for the company. If one partner wants to build a well-known national chain of retail outlets and the other partner only cares about earning a decent living, the business is destined to fail. Set a clear, agreed-upon course for the business that meets the needs of both partners.

Define Business Roles and Responsibilities

A winning business partnership capitalizes on the strengths and skills of each partner. Divide business roles according to each individual's strengths. For example, if one partner is strong in marketing, operations, and finance and the other partner excels in sales, human resources and leadership then split tasks accordingly.

Binding agreement authority is the ability to enter into contracts with other entities. You might consider deciding if any partner has this authority, and in what scope. You and your business partner could split this authority based on the responsibilities you each take on.

If your partner is responsible for procurement, they could enter a contract with a supplier without needing to confer with you. By agreeing who can make these kinds of decisions, you mitigate the risk of conflicts down the road.

The structure you choose for your business will dictate how you and your partner pay taxes for the business. Limited liability companies and general partnerships have different liabilities and tax responsibilities.

Avoid the 50-50 Split

It may seem logical and fair to equally split decision making. However, this kind of split can impair decisions. Instead of a stalemate when you can't come to a compromise, consider developing a way to overcome differences.

If this is not possible, then consider using an outside source to weigh in on big-ticket disagreements. You may not want this source to have final decision ability, but see if they will analyze the situation and give you their opinion for a course of action. If needed, get more than one opinion.

There will be disagreements between partners. Not many pairs of people can agree 100% of the time. You should consider how you are going to handle disputes between each other, with employees, suppliers, customers or any other stakeholders.

One way to deal with this is to include a mandatory arbitration clause in your partnership agreement and the contracts you make with other entities. Arbitration is the use of an outside party to determine the outcome of disagreements and disputes.

Arbitration is a legally recognized method of dispute resolution. Binding arbitration means that all parties involved agree to abide by the decision of the arbitrator.

You should decide with your partner how much each of you is going to contribute to setting up your business or partnership. If you are both already operating, the costs may not be as high as if you both needed to start out.

Everyone has their own limit for tolerating risk. Financial risk can be more stressful than physical risk because it affects much more than your own safety. You should discuss with your partner how much financial risk you both can tolerate, and set limits.

An example of risk could be the method that you choose to finance your business. There is generally more risk involved with debt financing than with equity financing (using loans to finance instead of issuing shares, venture capitalists, etc.).

You may not have much of a choice at first how you finance your business, but be sure all parties understand the risks, and how much each person is responsible for.

The type of business you put together will also dictate the risk that you assume. Creating a limited liability company keeps owners from personal responsibility for the debts of a failed business.

When you create your partnership, you should discuss the expectations for pay.

Most businesses do not generate profit within the first year or even the second year . The number one reason new businesses fail is that they don't have enough cash to pay the business' and owner's bills. Ensure you and your business partner know how you are going to make ends meet.

Generally, in a partnership, the assets belong to the business unless specified in the partnership agreement. Partners will then own a percentage of the value of the company property based on the agreement. This is usually only a concern for businesses when they are closing out, and owners are working through who gets what.

Plan for Buy-Outs, Dissolutions, and Exits

Partnerships dissolve for many reasons. One partner may decide the partnership is no longer beneficial. You should include buy-out terms in case one partner wants to leave.

You might consider adding a dissolution clause to the partnership agreement. If the partnership is not working out, it would be beneficial to have pre-agreed terms for splitting things up.

An exit strategy is a plan if both partners should want out. This is can be accomplished by selling the company, or by selling all the inventory, assets, and interests a business has.

A strong business partnership is built on open communication. Meet on a regular basis so you can share grievances, review roles, provide constructive criticism, and discuss future plans for the growth or direction of your business.

Your business may grow over time as you and your partner work together. You may want to readdress your partnership agreement as your business grows. You may need to add more partners, include senior employees, and include expansion agreements.

You could include this in your initial agreement, but it might be better to wait until you are in a position to consider growth and expansion.

It is simple to set up a partnership because there are no legal documents to file. A written agreement, signed by all partners, is a legal document recognized by law.

Partnerships are often an oral agreement between two or more parties. Oral agreements can present problems in case of disagreements, even though they are legally binding. Instead, avoid potential problems by drawing up a partnership agreement.

Your partnership agreement should include the following (at a minimum):

Amount of equity invested by each partner
The type of business
How profits and loss will be shared
Decision-making policies
Partners' pay and other compensation such as bonuses
Distribution of assets upon dissolution of the business
Provisions for changes to the partnership or provisions for dissolving the partnership
Parameters of a dispute settlement clause
Settlement of the business in case of death or incapacitation
Restrictions regarding authority and expenditures
Expected length of the partnership

It's always worth considering a business partnership structure when you find someone who complements your skill set and you know will add value to your company. These partnerships can be enjoyable and lucrative if the right foundation is cemented in the beginning.

What kinds of business partnerships are there?

There are three types of partnerships. A general partnership (GP) involves partners who all have liability for debts and lawsuits. In a limited partnership (LP), one or more general partners manage the business and have liability, while other partners don't participate in the operations and don't have liability. Finally, in a limited liability partnership (LLP), all partners have limited liability.

What's the difference between a partnership and an LLC?

A limited liability company (LLC) with two or more members (owners) is treated as a partnership for income tax purposes. The main difference between an LLC and a partnership is that in an LLC, members don't hold personal liability for the company. In many partnerships, only limited partners are protected from personal liability for the company.

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Small Business Administration Office of Advocacy. " Small Business Facts ."

Internal Revenue Service. " Limited Liability Company (LLC) ."

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What Is a Business Partnership and How Does it Work?

A business partnership is an arrangement in which two or more individuals co-own a business entity and share in its profits and losses. This co-ownership is formalized through a partnership agreement that outlines roles, responsibilities, and profit-sharing structures.

Business partnerships can take several forms, each with unique characteristics:

General partnerships (GPs): All partners are equally liable for the organization’s debts, obligations, and liabilities.
Limited partnerships (LPs): Some partners have limited liability and restricted management roles, while others, known as general partners, assume full liability.
Limited liability partnerships (LLPs): All partners can actively manage the business, with liability protections for all partners. Specifics vary by state, but partners in an LLP are typically not personally liable for business debts or the negligence of other partners.
Limited liability limited partnerships (LLLPs): All partners have limited liability against partnership obligations, even those stemming from the actions of their co-partners. However, only general partners can actively manage the business.

Advantages and Disadvantages of a Partnership Business

Understanding the pros and cons of forming a partnership can help you decide whether it’s the most beneficial structure for your organization.

Stronger financial position: The ability to pool resources can provide your business with more capital and access to new investors, while better positioning the company to borrow money. Sharing business expenses with partners can also help you save more than you could on your own.
Shared expertise: Sharing skills and institutional knowledge is a key benefit of a business partnership. This can help broaden your expertise and the versatility of your business.
A broader network: By sharing contacts and connections with business partners, you can develop new relationships and expand your professional network.
Fresh eyes: Bringing in partners can provide new perspectives on how you do business by seeing things from a different angle. Partners can offer fresh ideas, market strategies, and inspiration to grow your business.

Disadvantages

Liability: The primary drawback of a general partnership is that all partners are fully liable for the financial obligations of the business and share losses, debt, and risk. This means creditors can seize any partner’s personal assets if these obligations aren’t met.
Loss of full control: Unlike sole proprietors, who are used to complete decision-making autonomy, partners in a partnership must share decision-making authority and may need to compromise when there’s a disagreement.
Potential for conflict: Having more than one person making business decisions creates the potential for differences of opinion that can lead to conflict. Partners may also become bitter if they feel like one person isn’t contributing his or her fair share.
Difficult to sell: A partner can’t sell a business without the consent of all the other partners, unless stated otherwise in a partnership agreement. This could potentially create a stalemate if and when a partner wants to leave.
Risk of instability: Without a comprehensive, predetermined partnership agreement in place, unexpected events, like a partner’s decision to leave , their death, or an illness may put the future of the company in jeopardy.

How to Create a Partnership Business

Working with one or more partners can add complexity to setting up a business. Adhering to certain steps can help simplify the process.

Select a partnership structure

To determine the ideal partnership structure, assess your liability preferences an desired management structure. Investment needs and future business goals can also dictate the best partnership choice. For instance, if you’re seeking significant external investment without giving investors a role in daily management, an LP might be ideal. Conversely, if you anticipate rapid growth and want to limit personal liabilities while maintaining managerial control, an LLP or LLLP could be a better fit.

State-specific laws can also affect partnership functions and rights, so that may be another consideration to keep in mind.

Choose partners and their roles

Find partners you trust, as this decision sets the tone and terms of your business. Decide how much it will cost to join the partnership, what percentage of the profits each partner will receive, and which roles and responsibilities each partner will have. Some partners may contribute equity or ownership share in the business, while others might be salaried partners who are paid as employees.

Name your business

Your partnership’s name is often a prospect’s first impression of your business. Consider a name that accurately represents the purpose of your partnership business or that incorporates the names of your partners as well as any designations, such as LLP or GP. Make sure to pick a unique name that isn’t already in use or trademarked to prevent legal complications.

Register your partnership

In the U.S., partnership businesses must register their names with the state in which they plan to operate. Additionally, registration might be necessary to obtain the appropriate business licenses or permits required by that state or local jurisdiction. Note that specific requirements can vary from state to state. Registration is typically required to open a business bank account, and will also help prevent inadvertently choosing the same name as an existing business.

Obtain a business identification number

In the U.S., business partnerships must obtain a business identification number from the Internal Revenue Service (IRS).

Create a partnership agreement

After you and your partners agree to their roles and responsibilities, get everything in writing. An attorney can help you draft a business partnership agreement to detail provisions, such as each partner’s rights and duties, financial obligations, profit distribution, ownership, dispute resolution, confidentiality, and exit strategy.

Secure necessary licenses and permits

To comply with federal, state, and local laws and regulations, partnerships may need specific permits or licenses to operate. For instance, the nature of the business activity and where it’s located can dictate state licensure requirements. Certain business activities may also require specialized licenses. For example, restaurants might need health permits, liquor licenses, or music licensing. Professional services – such as law, medicine, or accounting – often need professional licenses.

Bringing in partners can provide new perspectives on how you do business by seeing things from a different angle. Partners can offer fresh ideas, market strategies, and inspiration to grow your business.

The Business Partnership Agreement

A business partnership agreement is a written contract between partners that specifies their obligations and contributions to the business, as well as other conditions of their relationship. Every business partnership agreement should detail the following clauses:

Who makes decisions: Determine how you will make important decisions and what to do when partners disagree or when there’s a tie.
Percentage of ownership: It’s important to calculate and clarify how much of the business each partner owns. Also indicate how much money each partner contributed upon joining the business, and what should happen if the business needs more money to operate.
Distribution of profits and losses: Set a formula for how partners will share earnings as well as losses. This might be based on ownership percentage, specific roles, or other criteria.
Exit and transition strategies: Come up with contingency plans for what should happen if a partner dies, becomes disabled, or wants to leave the company. Specify the rights of the remaining partners in such situations.

Does a Partnership Business Make Sense for Your Company?

Before you decide whether a partnership is the ideal business type for your organization, consult with an outside expert to carefully consider the following:

Legal liability: How much liability is ownership willing to assume? If you’re adequately insured and can afford to put your personal assets at risk, the financial opportunities of a partnership might be worth the risk.
Long-term plans: Look ahead to what might happen to the business in the future. In a partnership business, it’s important to consider who will take over the business after the founding partners are no longer involved.
Costs: Although corporations offer stronger liability protection compared to partnerships, they require more extensive record-keeping and reporting, thus incurring higher administrative costs than other business entities. They’re also the most expensive business type to form, making partnerships a more attractive option for many.
Operational freedom: The business structure you choose can dictate how much flexibility, administrative responsibilities, and decision-making power you’ll have. Corporations tend to be the most restrictive in these areas. If you’re looking for more freedom, less bureaucracy and the authority to call the shots, a sole proprietorship might be the right choice for you. Partnerships fit somewhere in between, combining the benefits of autonomy and shared decision-making responsibilities.

The Bottom Line

Business partnerships have many advantages for someone looking to form a new company. Because they include several variations from which to choose, partnerships often combine the best attributes of other business types, offering flexibility around costs, liability, and autonomy. Selecting the right business type, however, often comes down to the unique circumstances of each business. Consider consulting legal and business experts to understand the implications of each business type, as well as the various federal and state requirements necessary to create them.

A version of this article was originally published January 15, 2020.

Photo: Getty Images

Business Plan for Partnership Firm

A business plan for partnership firm is recommended for anyone entering into a business partnership. 3 min read updated on February 01, 2023

Updated November 2, 2020:

A business plan for a partnership firm is recommended for anyone entering into a business partnership. A business partnership is two or more people working together to run a business. Each person takes on equal risks and rewards that come from the business. A proper business plan is ideal for handling current and future business decisions.

Steps For Planning a Business Partnership

Write a mission statement to clearly state the direction and goals the business plans to take. By writing a mission statement, the partners agree to the company's direction now and in the future.
Develop a reimbursement plan for the costs and investments incurred during startup. The amount of money provided for the startup is not always equal. Therefore, it is beneficial to make a plan that takes this into account with repayment and returns on investment. Avoiding arguments over the value of the startup amount versus levels of sweat equity will be removed with a reimbursement plan.
Create a method to resolve partner disputes. If an odd number of members are part of the partnership, you can choose to vote democratically. In the case of two partners, the partners may split areas of the business having the final say. For example, one person can make final decisions on marketing and sales planning, while the other person makes final decisions on financial planning.
Appoint an outside panel of advisors, or ombudsman , to resolve any internal disputes. Trusted experts should always be used to avoid ruining the partner relationship.
Divide all the responsibilities of the partners related to labor and management and assign the amount of compensation they will receive. The compensation is not always equal based on the workload the partner takes on.
Request that outside experts review the partnership agreement for any legal or accounting mistakes. The experts may be able to point out unknown problems that exist in the agreement. This review should take place before the partnership begins business operations.

Partnership Deed

A partnership deed and partnership agreement are the same, but the partnership deed is in writing . A partnership agreement can exist solely through verbal communications or actions. A partnership deed is recommended for businesses as it clearly defines the terms of the partnership.

The partnership deed helps prove the agreed-upon terms if there are any conflicts. Without a deed, the rules to settle disputes will fall to the state laws where the partnership exists. This creates another issue where one partner may file suit to benefit from the existing laws. Legal action can be avoided with a partnership deed that lists all details of the business that the partners agreed to when they began the business.

Partner Business Plans

When legal firms are looking to add a new partner, a well-written business plan that shows the new partners' intent to grow the business will make them stand out from the rest of the applicants. The business plan should exceed the expectations of the firm.

The key elements of the business plan are:

Create an introduction that details your professional history, areas of expertise, and why you are the right fit for the firm.
Provide market research and analysis of the needs of the local area, what competition exists, and why the firm offers the best way to reach this marketplace.
Describe your current client base, prospective clients, and untapped areas you'd like to reach.
Include any cross-selling opportunities that exist with current and prospective clients.
Share ways you can develop business sources including publications, speeches, client seminars, newsletters, and similar.
Explain your long-term strategy to meet the goals and targets that will benefit the firm.
Show a history of collections, billing rates, and billable hours and projections for the current year, three-years, and five-years.
Time the partners must invest.
Key staff will be needed (paralegals, secretaries, etc.)
Travel expenses.
Marketing materials,
Presentations.
Foreign language skill requirements.

End with a conclusion that is creative recaps the important points in the plan, what value will be added to the firm, and why you are the best fit for the firm.

If you need help with a business plan for a partnership firm, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

Limited Partnership Rules: Everything You Need To Know
Purpose of Partnership: Everything You Need To Know
Authority of Partners in Partnership: What You Need to Know
Partnership Agreement Between Company and Individual
Limited Company Partnership Agreement
How to Make a Partnership Agreement Legally Binding?
Contract for Business Partners
Disadvantages of Partnership
General Partnership
Partnership and Company

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Navigating Business Partnerships: Your Comprehensive Guide to Success

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Deciding on a legal business structure is a critical first step when starting a new company. It impacts everything – from how you report income and your level of personal liability to compliance with legal obligations at all governmental levels.

For many, forming a business partnership is a strategic move. Partnerships can offer a synergy of expertise and resources, creating a collective capability greater than the sum of its parts. Unlike an LLC, a partnership implies that the business is conducted by individuals who share the management and profits.

What is a partnership?

A partnership is when two or more people or groups agree to run a business together. Each partner shares in the profits, losses, and business decisions. Partnerships can be formed between individuals, businesses, or organizations – anyone who wants to work together to make a profit and move forward with shared goals. Simply put, it's a team running a business, sharing the ups, downs, and responsibilities.

Once you’ve formed a partnership, it’s pivotal to clearly and legally document the understandings and expectations between partners. This step ensures a smoother business operation and helps prevent potential disputes. This brings us to another crucial term – the partnership agreement , which outlines the detailed terms and conditions among partners.

What is a partnership agreement?

A partnership agreement is a contract between business partners. It answers: Who owns what? Who does what? How will profits (and losses) be shared? It also sets the rules for solving disagreements and explains what happens if a partner leaves or passes away. It's a safety net, ensuring everyone knows the plan and preventing future disputes.

In my nearly 30 years as an attorney, entrepreneur, and advisor, I have navigated the nuances of different business structures, often evaluating the unique benefits and challenges of forming a partnership. And as an attorney, I’ve drafted hundreds of partnership agreements for various ventures. And I was a partner in numerous legal partnerships (which historically had to be structured as partnerships). This guide is your roadmap, with practical advice, actionable tips, and best practices from mentoring hundreds of entrepreneurs and small businesses and helping thousands start and expand their ventures.

Partnerships: A Comprehensive Guide

Types of business structures, benefits of forming a partnership, disadvantages of partnerships, types of partnerships, taxes and partnerships, how to start a partnership, partnership agreement: everything you need to know, frequently asked questions about partnerships.

Before diving into the details, let’s look at the popular types of business structures :

Sole proprietorship: This business is owned and operated by a single individual. This person maintains complete control over the company but bears all the risk.

LLC (Limited Liability Company) : This business structure merges the characteristics of corporations, partnerships, and sole proprietorships. It provides limited liability protection to its owners or members.

Corporation : A corporation is a business entity legally separate from its owners or shareholders. It can sell shares of stock to raise capital, something a sole proprietorship or partnership can’t do.

Hire an expert to form your company and save time. Our trusted partners can help: Northwest ($39 + state fee) or Bizee ($199 + state fee) . We recommend Northwest. After evaluating the leading registration companies, Northwest stands out as our top choice due to its competitive pricing, exceptional customer support, and commitment to privacy. Pay just $39 + state fees and you'll get a free year of registered agent service, articles of organization, privacy, and client support from local experts.

Embarking on a business journey with a partner isn’t just about having company. It’s about combining strengths, sharing responsibilities, and multiplying resources to create a resilient, resourceful, and robust venture.

Forming a partnership can weave a safety net, enabling the business to take leaps with shared risk and blend diverse skills to brew innovation and stability. From shared financial responsibilities to melding distinct skills, a partnership opens up a world where mutual benefits are not just possible but are often amplified. Here are fifteen tangible benefits for people when choosing a partnership structure:

Shared responsibility. Partnerships often result in shared responsibility, which can lessen individual load. If one partner is adept at digital marketing, they can focus on online promotions, while the other, perhaps skilled in operations, manages order fulfillment. In a retail shop, one partner could manage in-store operations while the other takes care of supplier relationships and inventory management.
Diverse skill set. Partners often bring varied skills and expertise, enhancing the business’s capabilities. One partner could focus on website design and UX design, while the other manages content creation and customer service. One partner could specialize in sales and customer interaction on the shop floor, while the other could focus on back-end operations and stock management.
Enhanced creativity. With more minds at work, partnerships often foster enhanced creativity and innovation and can help you develop the best business ideas . An online design store can have one partner focused on creating unique designs while the other ensures they are showcased innovatively on the platform. While one partner brings innovative culinary ideas to a restaurant, the other might introduce fresh, customer-engaging service strategies.
Risk mitigation. Having a partner means risks, especially financial ones, are shared. Both partners share the financial burden if an e-commerce platform fails to perform as expected. In a physical store, if a new product line doesn’t sell as projected, both partners absorb the financial impact.
More resources. Partnerships can mean access to more resources, such as capital, clientele, and industry contacts. In an IT firm, one partner might bring in financial investments while the other brings a rich client database. In a consultancy , one partner may offer a spacious office for client meetings while the other brings in crucial industry contacts.
Networking opportunities. More partners typically equate to a wider network, which can be leveraged for business growth. An online advertising agency can benefit from one partner’s digital influencer contacts while utilizing the other’s connection with ad platforms. In a real estate business , one partner’s connections with property dealers and the other’s links with advertising agencies can be beneficial.
Improved decision-making. Different perspectives often lead to well-rounded decision-making. In a digital magazine, editorial and technical decisions can be balanced between partners with expertise in each field. In a bookstore, one partner might select the inventory based on literary knowledge, while the other ensures technological tools (like point-of-sale [POS] systems) are updated and efficient.
Flexibility . Partnerships often provide flexibility in management and operations. In an e-learning platform, partners can manage course updates and student interactions alternately, ensuring continual operation even during vacations. In a clinic, partners can alternate their duty hours to provide consistent services without burnout.
Tax benefits. Partnerships can offer various tax benefits, depending on jurisdiction. An online consultancy might benefit from tax deductions available for partnerships in its operational domain. A manufacturing unit run as a partnership may avail of certain tax credits available in its location.
Easier to form. Forming a partnership can often be less complex and requires fewer formalities, paperwork, and expenses. Two freelancers might combine services and form a partnership firm with minimal documentation. Two artisans might join to create and sell products in a shared physical space with less bureaucratic involvement.
Boosted financial capability. A partnership can amplify a business’s financial prowess by pooling all partners’ monetary resources and creditworthiness. In a SaaS business , while one partner might inject direct capital, the other might facilitate a loan due to their robust credit history. A coffee shop partnership might see one partner contributing more towards initial capital while the other agrees to a higher profit-sharing ratio to balance the scales.
Companionship and moral support. A partner can offer emotional and moral support, making the entrepreneurial journey less isolating. When running an online retail store, partners can buoy each other during slow sales, brainstorm new strategies, and provide moral support. In a physical fitness center, when one partner feels disheartened due to challenging situations, the other can provide encouragement and shared resolve to navigate through.
Client satisfaction. With multiple partners, client needs can be addressed more comprehensively and responsively. A digital marketing firm can provide client services across varied time zones, with partners strategically located in different regions. A consulting firm with partners specialized in various domains can offer clients a one-stop solution, enhancing client satisfaction and retention.
Flexibility in ownership transfer. Partnerships generally facilitate smoother transitions in ownership compared to other business structures. In an online tutoring platform, a partner wishing to exit can transfer their ownership stake to the remaining partner or a new entity more fluidly. In a law firm, a retiring partner might transfer their stake to an existing partner or a new entrant, ensuring continued business operations without complex restructuring.
Greater borrowing capacity. Partnerships often have a larger borrowing capacity than sole proprietorships due to combined assets and credit. An e-commerce partnership might secure a more substantial loan to scale operations, utilizing the combined assets and collateral of the partners. A manufacturing business partnership could leverage partners’ combined creditworthiness to secure better borrowing terms for expansion or upgrading machinery.

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Being tethered to another person or entity in business could mean conflicts, liability, and intricate financial management. Here are ten potential drawbacks of partnerships:

Conflict in decision making. Decisions might be contested when more than one person is involved, and conflicts can arise. Two partners in an e-commerce platform might disagree on inventory purchasing decisions. Partners in a bookstore might have conflicts over which books to stock and promote. This is common in other types of entities, too. Over the years, I’ve had many conflicts with partners in partnerships, LLCs, and corporations. However, this is often legally more complicated in partnerships because they are often equal, and it’s not always clear who makes the final decision.
Joint liability. All partners share the burden of business debts and liabilities. All partners in a digital marketing agency may be liable for a debt incurred due to a failed campaign. In a restaurant business, partners are responsible for any debts accrued due to a failed event or investment.
Profit sharing. All profits have to be shared among partners, sometimes leading to discontent. Profits from a thriving online coaching platform must be distributed among all partners, potentially sparking disputes. Profits from a successful promotional event at a retail shop must be shared among partners, possibly igniting conflicts.
Limited capital. Raising funds can be limited to the personal funds or creditworthiness of the partners. An app development partnership may find difficulty scaling due to limited capital investment. Due to constrained capital, a dental practice partnership may struggle to expand to new locations.
Business continuity. Partnerships may face continuity issues due to the withdrawal or death of a partner. An online consultancy may face disruptions if a key partner departs unexpectedly. A partner’s sudden exit from a law firm could potentially destabilize client relationships and ongoing cases. I’ve seen this happen often at law firms and other professional partnerships.
Diverse risk appetite. Partners might have different thresholds for risk, which can influence business strategies. A partner in a FinTech startup might be reluctant to explore a new, innovative, but risky feature, contrary to the other’s willingness. Partners in a construction business might disagree on taking up a large, potentially lucrative, but risky project.
Limited expertise. Limited to the partners’ skills and knowledge, some areas may lack expertise. A blogging platform run by content creators might lack technical optimization due to limited IT knowledge. A physiotherapy clinic may not optimize its marketing strategies due to a lack of marketing expertise among the partners.
Shared losses. All partners have to bear losses, which can impact personal finances. If an online retail business incurs losses, the personal savings of all partners may be impacted. In an event management partnership, a failed event could dent the personal financial health of all partners.
Complicated exit strategy. Exiting or dissolving a partnership can be complex and may affect business operations. Leaving or dissolving a partnership in a web development business might disrupt ongoing projects. A partner’s exit from a salon business might involve intricate valuation and division of assets.
Customer trust. When a partner leaves or a partnership dissolves, it might erode customer trust and loyalty. In a SaaS business, customers might feel uncertain about the continuity and reliability of the service upon changes in partnership. Patrons of a local cafe might be skeptical about quality consistency if a well-known partner departs.

Recognizing these potential challenges allows prospective partners to tread wisely, crafting strategies that mitigate these risks and leveraging the benefits to navigate the potential hurdles of partnership businesses.

Partnerships are not a one-size-fits-all model. There are various forms, each bearing its distinct set of rules, liabilities, and operational methods:

General Partnership (GP)

All partners share equal rights, responsibilities, and liabilities in a general partnership.

Best for: Consulting firms, law practices, small retail businesses, and local service providers. Not ideal for: Ventures with unequal investment or involvement, high-risk businesses, and tech startups with substantial liability.

Limited Partnership (LP)

Some partners enjoy limited liability and are not involved in management, while others have unlimited liability and manage the business.

Best for: Real estate investment groups, film production companies, family businesses wanting to involve silent members, and venture capital firms. Not ideal for: Small businesses with active partners, technology companies, and businesses that require all partners to be involved in management.

Limited Liability Partnership (LLP)

All partners have limited liability and can be involved in business management.

Best for: Professional practices like law and accountancy firms (my law firms started as partnerships and converted to LLPs when state laws permitted this conversion), consulting businesses, medical practices, and design agencies. Not ideal for: Businesses desiring simplicity in structure, sole proprietorships, manufacturing businesses with high liability.

Joint Venture

Two entities come together for a specific project or a specified period.

Best for: Construction companies on a specific project, tech companies collaborating on a product, multinational business expansions, and research and development projects. Not ideal for: Ongoing, long-term businesses, small local businesses, independent entrepreneurs, and ventures requiring a singular brand identity.

Strategic Alliances

Businesses collaborate and form strategic partnerships for mutual benefit without forming a new entity.

Best for: Airlines sharing certain routes, e-commerce, and retail collaborations, tech companies sharing technology, and cross-promotional marketing campaigns. Not ideal for: Businesses desiring shared liability and responsibility, ventures that need a unified brand, and small businesses with limited resources.

Limited Liability Limited Partnership (LLLP)

A variation of the LP where even general partners can have limited liability.

Best for: Large investment projects, family estate planning, agricultural operations, and certain real estate investments. Not ideal for: Small scale businesses, tech startups, businesses with straightforward operational needs, and single-location service providers.

Depending on different businesses’ unique financial and operational configurations, partnership taxes could be either an ally or an adversary. While a partnership as a business entity does not pay taxes, the profits pass through to partners who report this income on their personal tax returns.

Businesses that benefit from partnership taxation

Consulting firms. Shifting income among partners can optimize individual tax scenarios.
Real estate investment groups. Using pass-through taxation to manage investment gains and losses effectively.
Small local retailers. Capitalizing on simplicity and avoiding double taxation.
Family businesses. Managing estate planning and wealth transfer with a flexible partnership structure.
Law practices. Mitigating liability and enjoying the flexibility of distributing profits.
Freelance and creative agencies. Navigating varying incomes through beneficial income-splitting among partners.
Joint ventures in research and development. Appropriating expenses and research credits optimally among entities.
Professional practices (e.g., doctors, architects). Managing professional income with flexibility among partners.
Craftsmanship businesses (e.g., boutique craft shops). Handling often fluctuating incomes and expenditures in a straightforward manner.
Educational services. Distributing educational revenue and operating expenses effectively among partners.

Businesses potentially disadvantaged by partnership taxation

High-tech startups. Potential challenges with investment funding and allocation of losses.
Large-scale manufacturing businesses. The complexity in managing and allocating large expenses and revenues.
Corporations with international operations. Navigating through international tax law and potential double taxation issues.
Venture capital firms. Managing investor returns and extensive financial portfolios.
E-commerce giants. Handling extensive online transactions, international sales, and VAT.
Robust franchise operations. Distributing income and managing expenses across various entities.
Large agricultural businesses. Allocating extensive operational costs and managing international trade.
Biotech companies. Allocating extensive R&D expenses and managing investor relations.
High-risk businesses (e.g., adventure tourism). Balancing high liability with the fiscal flexibility of a partnership.
Companies with high capital expenditure (CAPEX) . Managing the allocation of significant CAPEX and related depreciation.

1. Choose a business name

Your partnership’s business name must embody your brand while adhering to your state’s regulations. Typically, it should be unique and not misleadingly imply that you’re a government agency or an unauthorized industry.

Brainstorm potential names and ensure they align with your brand message. Run a name check to confirm that no business in your state has claimed it. Also, check for available domain names to create a business website with the same name.

2. Draft a partnership agreement

This crucial document outlines how your partnership will function. Though not legally required in all jurisdictions, a partnership agreement can prevent future disputes.

Consider hiring a business attorney to draft the agreement. This document should cover, at minimum, the following topics:

The distribution of profits and losses
The roles and responsibilities of each partner
The procedures for adding or removing partners
The procedures for dispute resolution
The protocol in the event of dissolution of the partnership

Be sure all partners sign the agreement. Doing so is crucial for mutual understanding and legal clarity. The process is hassle-free when you sign documents online .

We go into more detail below on the key terms of a partnership agreement and the pitfalls you should avoid.

3. Register your partnership

Your partnership must be registered with the appropriate state agency, often the Secretary of State.

Check with your state’s Secretary of State office or a legal advisor for the specifics in your area. In most cases, you’ll need to file a document known as a “Statement of Partnership Authority.” This document generally includes details about your business name, purpose, duration of the partnership, and information about each partner.

4. Obtain an EIN

An Employer Identification Number (EIN) is your partnership’s Social Security number. The IRS uses it to track your business’s tax obligations. Even if you don’t have employees, an EIN is usually necessary.

Apply for an EIN through the IRS website—it’s free and straightforward. After submitting your application, you will immediately receive your EIN. The IRS has a helpful checklist to help you decide whether you need an EIN to run your business.

5. Open a business bank account

A separate business bank account helps you keep your business finances separate from your personal finances, making tax time much easier. It also lends credibility to your business.

When opening a bank account, choose a bank that caters to small businesses. Prepare to provide your partnership agreement, EIN, and business registration documents.

6. Register to do business in other states (if necessary)

If your partnership will do business in states other than where you registered, you’ll likely need to register your business there.

Each state has different rules regarding what constitutes “doing business” in their jurisdiction. Consult with a legal advisor to understand whether this step is necessary. Registration usually involves filing a similar form to the one you filed with your home state and paying an additional fee.

7. Obtain necessary permits and licenses

Depending on your industry and location, your partnership may need specific business licenses or permits to operate legally.

Research federal, state, and local requirements and apply for necessary permits and licenses. You can use the U.S. Small Business Administration’s license and permits tool as a starting point.

By following these steps, you’ll ensure your partnership has a solid legal foundation, giving you peace of mind to focus on growing your business.

Embarking on a business journey with a partner requires trust, mutual goals, and a robust partnership agreement that stands the test of time and tribulations. Here are the vital components and the actionable strategies to bolster each item in a partnership agreement.

Ownership percentages

Clearly outline the specific percentages owned by each partner, avoiding generalized statements. Employ precise language and formulas to describe how ownership percentages might change in various scenarios.

Protect against: Discrepancies or disagreements about ownership due to vagueness or oversights in the document—lack of clear procedures for recalculating ownership percentages in the event of capital changes.

Profit and loss allocation

Define explicit mechanisms or formulas for allocating profits and losses among partners. Include clauses for exceptional circumstances, such as unexpected losses or extraordinary profits. Protect against: Conflict arising from perceived unfair distribution, especially in scenarios not covered in the agreement—legal challenges due to ambiguous or non-compliant profit and loss allocation methods.

Roles and responsibilities

Detail each partner’s duties, powers, and limitations, ensuring clarity and specificity. Establish mechanisms for adjusting roles and responsibilities as the business evolves. Protect against: Conflicts or inefficiencies due to overlapping or unclear roles. Legal or operational issues arising from failure to adhere to documented responsibilities.

Dispute resolution

Specify a detailed, step-by-step process for resolving internal disputes to avoid court battles. Incorporate a clause mandating mediation or arbitration before any legal action. Protect against: Ignoring minor disputes that could escalate into larger, more damaging conflicts—encountering a stalemate situation if the agreement is too vague or doesn’t cover a particular dispute.

Capital contributions

Clarify the initial contributions and any additional contributions required from partners. Outline procedures and conditions for raising additional capital in the future. Protect against: Financial stress due to unclear or insufficient capital contribution arrangements. Disagreements about valuation and equity when accepting additional capital contributions.

Decision-making protocols

Enumerate key decisions that require unanimous consent and those that can be made individually. Develop a system or voting mechanism for making collective decisions. Protect against: Experiencing delays or disruptions due to a lack of decision-making structures. Encountering dissension from partners who feel sidelined or overruled in the decision-making process.

Partner exit and succession planning

Define clear exit strategies, including buyout clauses and valuation methods. Implement a structured succession plan for seamless transitions during partner exits. Protect against: Fumbling business continuity during an unexpected exit or transition. Engaging in legal battles over partner exits due to poorly defined exit clauses.

Death or incapacity of a partner

Establish guidelines and procedures for managing the business interest of a partner who becomes incapacitated or passes away. Specify the rights of heirs or successors to a partner’s business interest. Protect against: Enduring business disruption and potential discord with heirs due to the absence of a clear plan. Navigating through legal complexity regarding inheritance and stakeholder rights without clear direction.

Non-compete and confidentiality clauses

Draft precise non-compete clauses defining the scope, duration, and geography to protect the business. Incorporate strict confidentiality clauses safeguarding business secrets and proprietary information. Protect against: Experiencing damage from a partner who engages in competing ventures or leaks sensitive information—facing legal challenges for enforcing overly restrictive or vague non-compete clauses.

Amendments to the agreement

Specify the process and any necessary approvals for amendments to the partnership agreement. Ensure flexibility while maintaining a structure that prevents arbitrary changes. Protect against: Encountering disagreements or legal issues due to inadequate procedures for making amendments and limiting the business’s adaptive capability by making the amendment process overly rigid or cumbersome.

Business sales and transfers

Define the conditions under which business assets or the entire business can be sold . Specify the partners’ rights, such as the right of first refusal, in the event of a proposed sale. Protect against: E ngaging in disputes over the validity of a sale or transfer of business shares. Encountering unexpected exits or entries of partners due to unscheduled sales or transfers.

Financial management and distribution

Clarify protocols for financial management, including budget approvals and financial reporting. Detail the procedures and schedules for distributing profits among partners. Protect against: Mismanagement of finances or inequitable distribution leading to internal conflicts—legal scrutiny or penalties due to non-compliance with financial management norms.

Admission of new partners

Describe the process, conditions, and any restrictions for admitting new partners. Specify any changes to existing partners’ equity, roles, and responsibilities when a new partner is admitted. Protect against: Disrupting business harmony due to the unsystematic admission of new partners and altering the equilibrium of control and influence among existing partners.

Resolution of violations

Develop a mechanism to handle violations of the agreement by partners. Include provisions for penalties, reparations, or corrective actions in the event of a violation. Protect against: Fostering a toxic environment by neglecting or ineffectively handling violations and engaging in legal battles stemming from unaddressed or improperly handled violations.

Dissolution procedures

Establish clear conditions under which the partnership can be dissolved. Detail the process for asset liquidation and debt clearance upon dissolution. Protect against: Encountering legal issues and conflicts during dissolution due to vague or incomplete procedures. Financial losses due to an unstructured or hurried dissolution process.

Remember, these items provide a comprehensive guide, but every business is unique. Tailor your partnership agreement to your specific needs, considering all possible future scenarios, and always consult a legal expert to ensure its solidity and enforceability.

How is a partnership formed?

A partnership is typically formed through a partnership agreement, which lays out all the partners' terms, responsibilities, and profit-sharing. It isn't mandatory by law but is crucial to avoid future disputes. Key steps include deciding on a business name, registering the business, obtaining necessary licenses and permits, and crafting a comprehensive partnership agreement.

What are the main types of partnerships?

Primarily, there are three types of partnerships: general partnerships, limited partnerships, and limited liability partnerships, each differing in terms of liability and management structure. A business might choose a type based on its operational, financial, and legal needs and objectives.

Are partners personally liable for business debts and obligations?

In general partnerships, partners are usually personally liable for business debts and obligations. However, in limited and limited liability partnerships, partners can limit their liability to the amount they have invested in the business.

How are partnerships taxed?

Partnerships themselves are not subject to income tax. Instead, their profits are passed to the partners, who report the business income or loss on their personal tax returns. Each partner's share of profits and losses, usually outlined in the partnership agreement, is reported to the IRS on a Schedule K-1.

How does a partnership agreement protect the partners?

A partnership agreement provides a clear framework regarding each partner's contributions, profit and loss distribution, and rules for resolving disputes, adding or changing partners, and dissolving the partnership. It is a safeguard, providing solutions and predetermined courses of action for various scenarios.

What happens if a partner wants to leave the partnership?

Departure scenarios should ideally be addressed in the partnership agreement. Depending on the terms, the leaving partner may sell their share to the remaining partners, to an outside party, or trigger the dissolution of the partnership. The specific processes and implications may vary based on the agreed-upon terms and type of partnership.

Can partnerships be formed without a written agreement?

Yes, partnerships can technically be formed without a written agreement through verbal agreements or the actions of a business's operators. However, a written partnership agreement is crucial to avoid potential disputes and clearly understand all partners' roles, responsibilities, and profit-sharing.

How are decision-making powers typically shared in a partnership?

Decision-making powers are usually shared based on the terms set in the partnership agreement. This can range from equal power for all partners to specified authority areas for each individual. Clearly defined roles and responsibilities can help streamline decision-making processes and prevent conflicts.

How is profit typically shared in a partnership?

The partnership agreement generally determines profit-sharing in a partnership. It could be shared equally or in proportion to each partner's investment in the business. Without an agreement, profits are shared equally among partners despite the level of investment or effort put into the business.

These questions serve as a starting point, providing a foundational understanding of partnerships and their nuances. Always seek advice from a professional specializing in business structures and partnerships for specific advice and strategic guidance.

Choosing a partnership can be an excellent decision for many entrepreneurs. Each business type has unique pros and cons. Therefore, evaluate your needs, seek professional advice, and make an informed decision.

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How To Build A Partnership Business Plan

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Partnerships have been an integral part of many go-to-market strategies for decades. For some brands, they drive an enormous share of total sales. For others, they drive next to nothing. What separates successful programs from unsuccessful ones is often the focus emanating from a strong business plan. As with any other go-to-market approach, partnership requires analysis and planning to achieve maximum potential.

A partnership business plan can help companies understand the channel's potential and the investments necessary to achieve those results. It also identifies the business partnership priorities that the team should focus on for maximum business impact. It’s different from a standard business plan in that you are not providing a rationale for an entire business but instead creating a roadmap for this critical business channel.

Setting appropriate expectations is even more critical than for other channels because of misconceptions many business leaders have about partnership. Many companies pursue partnership because they believe it will be a low/no-cost approach to driving sales. Somehow, goes this flawed thinking, the business partner will do most or all of the work of promoting the brand, and we can sit back and reap the benefits.

Certainly, one great rationale for the channel is strong ROI, but partnerships require resources and focus to succeed. A business plan can help clarify the business potential of the marketing strategy and the people, systems, and processes needed to achieve those results. This eGuide outlines the essentials for a strong partnership business plan and provides tips on how to deliver it. It provides insight as to what resources are needed to reach goals.

It is important to first set up the costs of setting up a program and the basic formula for customer acquisition.

The basic costs of a partner marketing program are:

Fixed costs:

Software to recruit, track and pay partners. This can also be a variable costs since some platforms charge a percentage of sale. But, most have a component that is a flat fee.
Service/headcount to recruit and manage partners. This can be an agency, an in house team or managed service from your tech platform. Sometimes agencies will work on a commission basis, but mostly this will be a relatively stable annual cost. Regardless, be aware that unlike programmatic, search or social, partnership marketing is still relationship driven and requires humans to connect. This takes time and it is facilitated by people who have relationships.

Variable costs:

Commissions paid to partners for a sale.
Any additional media costs including placement fees.

Note: be sure to build in a ramp up time for your partner program. Unlike search or social you can't just "turn on" a partner program. You need time to recruit partners and activate these partners. There is a lot of blocking and tackling involved and you should not expect to see results overnight. The rule of thumb is six months until full activation, but that varies by industry.

Customer Acquisition Cost

Ultimately, the success of failure of a new marketing channel will be its ability to acquire customers at an equal or lower cost than other channels. Start by identifying your overall CAC so that you can determine if your partnership financial and operating plans will be effective.

The basic formula is: {Fixed costs (like software, service, people) + (variable costs *volume)} / customers = CAC

Why Business Plans are Important

As partnership and affiliate play an increasingly important role in the total go-to-market for a brand, companies expect their leaders to offer a strong business case for additional investment. A solid partnership business plan will:

Help the company understand the business potential for partnerships
Enable business owners to understand and predict costs and benefits for proper resource and revenue planning
Provide straightforward ways to track progress toward achieving channel goals
Identify potential risks to achieving the goals and how to mitigate them
Establish a clear timeline of when a company can expect to achieve goals
Provide a complete picture so that the company can make an informed business decision on whether and how to invest in the partnerships channel

Beyond these tangible benefits, there is also the advantage of presenting and interpreting the opportunity in a context accessible to leaders within and beyond marketing.

Critical Components

Here’s a summary of critical elements for a partnership business plan and why they are important:

Executive Summary: This brief synopsis should highlight the key findings in the plan, from projected revenue and costs to the various advantages and risks of pursuing this line of business. Writing this part of your plan last is best after fully developing the other elements.

Scope and Description: This section of the plan provides a high-level outline of the types of partnerships you recommend pursuing - not channel by channel but rather in the context of what characteristics must be present in a potential partnership to warrant pursuit. We’ll provide a list of thought-starter questions to help you keep this high level and strategic rather than too specific and tactical.

Competitive Analysis: This section outlines how your key competitors leverage performance partnerships to build their businesses. Understanding competitive partnership activity contributes valuable learnings to your decisions about which partnerships to pursue.

Recommended Partnership Types: This section will enable you to list the types of partnerships you believe warrant pursuit, in priority order. The number of available partnership types is constantly expanding, so it makes sense to prioritize partnerships based on your revenue, profit, and brand equity goals. You should also consider what signals are available to ensure that potential partners are likely to consider working with you.

Operating Plan: Here is where you will outline the people, software, budget, and other resources required. You should also outline why your team is qualified and likely to succeed in building out the channel.

Financial Plan: Outline the costs and revenue expectations according to the approaches and timelines in use by your company. The level of granularity here really depends on how your company plans go-to-market initiatives and reports on performance.

Headwinds and Tailwinds: This section outlines the uncertainties that may help or hinder your ability to hit your targets.

Let’s consider each of these sections individually.

Executive Summary

Smart business opportunities can always be explained in a relatively small amount of words or “space.” Many companies require the rationale for an entire multi-million dollar business to be summarized in a single page. You can try to hit that target or give yourself two pages. But not more than that. Your ability to outline a business succinctly helps senior executives quickly understand why they should prioritize your initiative and demonstrates your ability to focus on what’s most important. Ask yourself:

How can I explain performance partnerships, the potential range of available opportunities, and why partnership represents an advantageous channel for business development?
What do senior executives need to know to understand the business potential of the partnerships channel?
What arguments and data are essential to evaluate this channel properly?
What topline data should I include to demonstrate the business value of pursuing the channel?

Providing hard numbers in your summary is critical if you are to gain buy-in from your leadership team. They must weigh any financial investment decision against the potential business value of other initiatives competing for resources. Make it easy for leaders to understand the enormous revenue and profit from partnerships. Use this channel's massive ROI and ROAS to telegraph why your recommendation warrants commitment.

It can be tempting to try to write this section first. Don’t yield to that desire. By building out your other plan sections first, you will have ready access to the information for the executive summary.

Scope and Description

This critical section explains the range of partners and types of partnerships you recommend pursuing. Having articulated guard rails will help your team focus on the best opportunities and help prevent “swoop and poop” requests from outside leaders and teams.

Start by declaring your commitment to PERFORMANCE or OUTCOMES-BASED partnerships, and define this category clearly. From there, outline other criteria that will help guide your decisions on whether to pursue and accept specific partners and programs. Consider:

What sort of scale should a partner offer to warrant your time and attention?
What brand considerations should be taken into account?
What targeting considerations should be “musts”?
Are you willing to pursue temporary partners, or do you want to focus only on evergreen relationships, and why?

Competitive Analysis

Competitive analysis can be an invaluable aid in guiding partnership decisions. Including competitive analysis in your plan serves several purposes:

It helps establish the channel as a viable option for your business
It provides insight into the potential scale and most significant opportunity sectors
It can help you determine appropriate offers so you can build your sales and profit models
It provides urgency to senior management (FOMO)

Competitive information is an aid to judgment, not a predictor of your results. It helps establish a baseline from which you can develop plans to surpass competitive program performance.

Here are a series of questions to help you gather as much relevant data as possible quickly:

What sorts of offers are my competitors making in their affiliate programs? You can also get great insights into how your competitors manage programs on knoji.com. Most programs also have affiliate intake pages on their sites that can be found in site footers or with Google.
What can you learn about the business structure of your competitors? Use LinkedIn employee searches as a starting point here.
Visit the top cashback and coupon sites to see if your competitors are active there.
Use an SEO tool like SemRush, Moz, or Ahrefs to search for competitor backlinks.
Monitor their websites and social media to look for signs of partnerships and offer programs.
Subscribe to their marketing automation email programs (assuming your domain isn’t blocked. It usually won’t be.)
Is there evidence that they use influencers to deliver brand messages and drive direct sales? What are the terms under which they work with influencers? Often it is easy to find insights on your influencer platform tool or by doing Google searches for program pages.
Large partners can sometimes share publicly available info to help you structure successful programs.
Searching for “Brand Trademark + Deals” can often uncover search partners and other partners active in a brand’s programs.
Searching LinkedIn for partnership-related titles can give you a sense of the size and focus of a brand program.
Search the offer “malls” of credit card reward programs to see if your competitors have offers available there. Note that card-linked offers are generally confined to retailer brands, so that can simplify your search.

These and other strategies can help you understand the partnerships competitors are pursuing and the specifics of their commission offers.

Recommended Partnership Types

Explain the specific classes of partnership that you want to pursue. Some categories to consider include:

Traditional Affiliates (e.g., RMN, GSG)
Mainstream Publishers (e.g., Conde Nast)
Blogger Influencers (e.g., Pioneer Woman)
Social Influencers (e.g., Paul’s Hardware)
Fintech Partners (e.g., Venmo)
Card-Linked Offers (e.g., Cardlytics/CC Reward Programs)
BNPLs (e.g., Klarna)
Conversion Optimization Partners (e.g., RevLifter)
Travel Rewards Programs (e.g., United Mileage Plus)
Clubs and Associations (e.g., AARP Rewards)
Employee Benefits and Rewards Programs (e.g., Bucketlist)
Brand-to-Brand Partnerships (e.g., brands in related categories)

This is by no means an exhaustive list but does include many of the most popular partnership categories for consideration.

The right partners for your business depend on your brand, price point, buying cycle, compensation rate, and other factors unique to your category and market position. Further, your brand values and brand equity also play critical roles. For example, some brands are entirely opposed to offering discounts publicly, which might rule out certain traditional affiliates. Other brands might be a great fit for travel rewards programs. Still others might be ideal for influencer programs because many opinion leaders write about your category.

Naturally, some of these channels are more developed than others. Some market sizing data is available for the most developed categories like traditional affiliates. Others will have a dearth of information. But even in those categories that are less developed, you can put pen to paper to make some estimates of potential sales from a channel.

Creating an Operating Plan

Any business needs resources to enable its establishment and growth. A partnership business is no different. An operating plan outlines the people, investment, and other resources necessary to facilitate success.

When creating a partnership operating plan, it’s valuable to start your thinking with “hats, not heads.” Define the roles and associated responsibilities needed before thinking about the individuals who fill them. While extraordinary individuals have tremendous value in a business plan, starting with hats instead of heads ensures that the needs of the business dictate the organization, not the wants of specific individuals.

For a company to deliver scalable and repeatable results, you need to create an organization and operating principles that are not dependent on specific “superstar” individuals. Investors say that one of the most common mistakes businesses make is building an organization and planning dependent on "superhuman" individuals. Remember that your star players can power more success for a business plan - they are not the essence of that plan. If you struggle with this recommendation, consider this: would you base your entire partnership program on an individual partner?

From there, you need to think about the financial investment you need. Take the time to think through your needs. Many people rush through this stage and later find themselves strapped when forgotten expense types emerge. At the same time, recognize that a business plan is also an expression of the potential value that can be driven through the channel. “Sandbagging” may price you out of consideration. Similarly, delivering too rosy a picture can help you skate through the early stages only to be called on the carpet later when your projections prove inaccurate.

The operating plan development process should be one in which you choose what to do first and what can wait. Think through what the company wants from you. Do you need to be profitable by month three or year three? You want the aggressiveness of your recommendation to align with company goals and investment style.

You cannot do everything at once, or you will do everything poorly. Prioritize the opportunities and layout why you have chosen those priorities. Consider the law of threes. Accept that few organizations can do more than three big things simultaneously. “Big” is a subjective measure, and bigness varies based on that organization's size and core competencies. Still, this concept helps guide people to a reasonable number of priorities for a period. Some would suggest that even three is too many. But surely we can all agree that more than three is a bad idea. Finally, it is often helpful to deliver multiple operating plans for different revenue projections/trajectories. Offer a low, medium, and high investment scenario to match the low, medium, and high revenue and profit projections you define in the next step.

After developing your “hats, not heads” plan, it’s perfectly valid to summarize the outstanding qualifications of those team members you have on hand to meet the business needs. Do so in the context of how they enhance your hat-defined org. That helps give your management team greater confidence in the wisdom of funding the initiative.

Creating a Financial Plan

The operating plan is a critical input for your financial plan. The financial plan is a projection of the revenue and profit from the channel. While, as you develop it, you will likely return to other elements of the business plan to adjust assumptions and figures, having baseline or ballpark figures for those elements of your program is crucial as you start to define the potential value of the business to your company.

There are many templates for building a financial plan available online. They are generally similar and often available without cost. They will require some adaptation to “fit” a partnership initiative, but they provide a good foundation.

Additionally, check with your CFO or company financial team to see if they have a model they believe in. This serves several purposes:

It aligns your effort to a format they are familiar with
It ensures that it is easy to understand your recommendations and compare your plan to other potential company investments
It demonstrates that you wish to partner with the financial team, which will be critical for your success.

If your financial team has a financial planning and analysis (“FP&A”) person, find out if you can ask for their help building your models. This will help you immeasurably and ensures that one of the critical evaluator/influencers is on your side later. Treat your company's financial team as a potential investor because that's what they are.

Identifying Headwinds and Tailwinds

It’s valuable to consider what macro changes could positively or negatively impact your success. Think both inside and outside the box in this area. Competitors, economic forces, and regulatory changes are three important considerations here, but there are likely others. Ask yourself:

What does an unsuccessful versus successful partnership look like?
What might affect customer receptivity to my products, services, and offers?
What might affect the willingness of the best partners to work with me?
What could positively or negatively affect the commission or payments I have to make per desired outcome?
What partnership agreement requirements could have a material impact on our success or liability?
What might limit the availability of data essential for measurement and optimization?

Once you have arrayed these potential challenges, you may be able to think of ways to reduce your exposure. Start by thinking about how intellectual property, speed to market, partnership exclusivity agreements, or other tools could help mitigate these threats. But whether or not you can think of ways to protect yourself from these risks, having identified these potential issues helps the business fully understand the opportunity you bring to them.

No sensible business leader will expect the partnership channel to be risk-free, but they will want to understand the scale and likelihood of the dangers. If your company cannot tolerate the potential problems associated with one or more of these key risk areas, better to know now than when it happens, and you have to explain the situation to the management team.

Conclusions

A partnership business plan's format, breadth, and depth should align with how your company expects such recommendations to be made. In general, it’s valuable to have an executive summary presentation and a more in-depth document available, along with detailed spreadsheets that chronicle your establishment and growth expectations.

For some, doing all this work may feel like a waste of time. After all, aren’t the benefits of a robust business plan obvious? But the plan not only helps your company understand and assess the opportunity. It also ensures that you have thought through the way forward and can make more of the right decisions on days 1, 91, 366, etc. Planning is good. Prioritization is good.

Having a plan also helps an organization understand what they approve and what will be necessary to achieve a strong partnership revenue stream. As discussed earlier, many companies enter into partnership thinking it is a low effort, low-cost means of driving rapid growth. By setting appropriate expectations and outlining the tremendous revenue and profit potential, you set yourself up for maximum success.

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Top 10 Partnership Plan Templates with Examples and Samples

DivyanshuKumar Rai

When partners enter a business at the outset, they are motivated and excited to embark on this exciting new adventure together. Initially, they agree on almost everything. These new entrepreneurs think they will be in business together for the rest of their lives or until they sell the company for untold millions of dollars.

They believe that nothing can or will go wrong. They are so sure of each other that they never bother to get a written partnership plan. What could possibly go wrong in this scenario? The short answer is, "A LOT!"

The reality is that, despite dreams of longevity and unwavering trust, business owners' desires and expectations change over time. A written partnership plan can manage these expectations and give each partner confidence in the business's future. A written plan can serve as a safeguard that protects both the business venture and the investment of each partner.

Now, you might be thinking, “How to get an effective partnership plan in place?” The quick answer: Partnership Plan Templates .

Every business requires a partnership plan. Small businesses seek out partnerships more to achieve their goals and objectives. Building a strategic partnership is more complicated than creating a partnership document, but it is the first step toward action. SlideTeam’s partnership plan templates maneuver your ship to the shore.

Let’s explore these!

Template 1: Vendor Strategic Partnership Engagement Plan

Get this Strategic Partnership Plan PPT Template and deliver an impactful presentation to your audience. Its layout is divided into four sections, each describing a critical aspect: Plan, Analyze, Identify, and Act. There’s a specified section for review to ensure you have that extra cushion to make amendments, wherever necessary. Get this template now.

Vendor Strategic Partnership Engagement Plan PPT Template

Download this template

Template 2: Strategic Partnerships Event Planning Service Company Profile PPT Template

This PowerPoint Template works wonders when you want to explain the role of strategic partnerships within an organization. It has ample space to highlight points you want to deliver in your presentation. You can use its standard layout to emphasize key details, including partner location, services they monitor, objectives, and more. Download it now.

Template 3: Internal Communication Plan For Partnership Firm

The importance of proper communication in the successful accomplishment of business objectives can’t be overstated. With SlideTeam’s handpicked internal communication plan template, you can enjoy the convenience of an uninterrupted flow of information across departments in your company. This plan layout describes:

Reasons for communication
Communication activity
Communication channel
Individual responsible

Download now.

Internal Communication Plan for Partnership Firm PPT Template

Template 4: Marketing Campaign Initiated by Partnership Timeline

Build a weekly timeline for your marketing campaign using this fantastic PPT Template. Till the campaign goes live, you can include and track KPIs to ensure your effort is successful. Here, there are some predefined parameters that you can use: Target mapping exercises, Prepare brands and categories, Assign partner roles, risk register update, Negotiation and recruitment, and Activation and management. Download it now.

Marketing Campaign Initiated by Partnership Timeline PPT Template

Template 5: Global Partnership Management for Planning and Communication

Global partnership management is a painstaking task that can be made easy with our exemplary template. It has a unique framework that explains key insights encompassing the five stages, namely: Prepare, Share Knowledge, Plan, Execute, and Achieve Results. Being 100% editable, you can tweak the design and include points in this template to serve your purpose. Download it now.

Global Partnership Management for Planning and Communication PPT Template

Template 6: Six Months Teamwork Partnership Strategy Roadmap

Teamwork is the key to success! We know you would have heard this phrase at least a million times, but it doesn’t take away even a slight bit of truth. Build a six-month teamwork partnership framework using our exceptional PowerPoint Template. It highlights the team member and phases spread across a month-wise timeline. The phases include:

Develop partnership strategy
How the partnership will operate
Ensure stakeholder support
Resource allocation
Review the partnership development process

Six Months Teamwork Partnership Strategy Roadmap with Project Planning PPT Template

Template 7: Five-yearly Teamwork Partnership Strategy Roadmap

With a similar design to the previous template, this template accelerates the process of building a five-year teamwork partnership strategy roadmap. It has some predefined phases which you can change to suit your business requirements. You can present it to higher management to get their approval on the partnership roadmap you are long working on. Get it now.

Five Yearly Teamwork Partnership Strategy Roadmap with Project Planning PPT Template

Template 8: Planned Partnership Strategy PPT Template

If you need a pre-built framework for drafting a planned partnership strategy, this is the perfect piece for you. Its layout is designed into five stages that you can use to explain critical insights that underline your strategy. You can also use it to highlight KPIs as well. Get it now.

Analysis User Requirement Planned Partnership Strategy PPT Template

Template 9: Strategic Partnership Showing Teamwork

‘Strategic partnership’ is a complex subject that commands resources to spark clarity in your audience. Lucky for you, SlideTeam has prepared this template that touches every essential parameter that encompasses it. This template highlights the points of collaboration, teamwork, strategy, plan, performance, and success. It is a roadmap with checkpoints you need to surpass to foster better partnerships within your organization. Download it now.

Strategic Partnership Showing Collaboration Teamwork Plan & Strategy PPT Template

Template 10: Partnership Action Plan PPT Presentation

A partnership action plan boiled down into three stages! Hard to believe, isn’t it? SlideTeam presents a PPT Template that displays a layout that does just that. It has three levels: Action, Planning, and Partnership. The idea behind these stages is, you have to define relevant actions to ensure your organizational plans aren’t affected. Doing so will ensure there’s a more inclusive partnership forging in your company across departments. Get it now.

Partnership Action Plan PPT Presentation PPT Template

Partnerships are critical to the success of any business. Merchants and traders have used the principles of strategic partnership to conduct their businesses since the genesis of trade and commerce; the trend continues today.

A partnership can take many forms, from business owners working together to invest in a project to firms sharing technical knowledge and ideas. Whatever a company does, finding the right partnership plan template that benefits both parties is critical. (And that’s why SlideTeam has put together this list of top 10 partnership plan templates!)

FAQs on Partnership Plan

What is a partnership plan.

A partnership plan is a way two or more parties in a business agree on conducting the venture together. Each party takes different functions to perform, helping the business run more efficiently. This plan is documented in the form of an agreement. This document lays down the ground rules on how the partners will handle business responsibilities, ownership and investments, profits and losses, and company management.

While "partners" usually refers to two people, there is no limit to how many partners can form a business partnership in this context.

How do you create a partnership plan?

When forming a business partnership, it is critical to draft a partnership plan contract that outlines all of the terms and conditions of the professional relationship. Your business partnership plan should include a list of all partners and should address the following issues:

Name of the partnership
Partnership goals
Partnership duration
Contribution amounts of each partner (cash, property, services, future contributions)
Each partner ownership interest (assets)
Management roles and terms of authority of each partner
Accounting obligations
Distribution of profits and losses between the partners
Salaries, work hours, sick leaves, and vacation times of each partner
Permissions and restrictions on any outside business activity
Buyout options of partners
Process for adding new partners or removing original partners
Terms and conditions of termination of the partnership

What are the stages of partnership?

Here are the five stages of partnership:

Stage I. The Singles Stage (Non-Partnering)

Stage II. The Searching Stage (Pre-Partnering)

Stage III. The Courtship Stage (Active Partnering)

Stage IV. The Bonding Stage (Consolidated Partnering)

Stage V. The Commitment Stage (Going to Scale)

What are the 5 principles of partnership?

There are five basic tenets that work together to form a framework for establishing a solid foundation for effective business relationships.

Shared knowledge
Agreed Goals
Balance of return

While some of these are easier to quantify than others, each has a significant impact on the partnership's strength.

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Partnership: Definition, How It Works, Taxation, and Types

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits.

There are several types of partnership arrangements. In particular, in a partnership business, all partners share liabilities and profits equally, while in others, partners may have limited liability . There also is the so-called "silent partner," in which one party is not involved in the day-to-day operations of the business.

Key Takeaways

A partnership is an arrangement between two or more people to oversee business operations and share its profits and liabilities.
In a general partnership company, all members share both profits and liabilities.
Professionals like doctors and lawyers often form a limited liability partnership.
There may be tax benefits to a partnership compared to a corporation.

Investopedia / Matthew Collins

Types of Partnerships

In a broad sense, a partnership can be any endeavor undertaken jointly by multiple parties. The parties may be governments, nonprofits enterprises, businesses, or private individuals. The goals of a partnership also vary widely.

Within the narrow sense of a for-profit venture undertaken by two or more individuals, there are three main categories of partnership: general partnership , limited partnership, and limited liability partnership.

General Partnership

In a general partnership, all parties share legal and financial liability equally. The individuals are personally responsible for the debts the partnership takes on. Profits are also shared equally. The specifics of profit sharing will almost certainly be laid out in writing in a partnership agreement.

When drafting a partnership agreement, an expulsion clause should be included, detailing what events are grounds for expelling a partner.

Limited Liability Partnership

Limited liability partnerships (LLPs) are a common structure for professionals, such as accountants, lawyers, and architects. This arrangement limits partners' personal liability so that, for example, if one partner is sued for malpractice, the assets of other partners are not at risk.

Some law and accounting firms make a further distinction between equity partners and salaried partners. The latter is more senior than associates but does not have an ownership stake. They are generally paid bonuses based on the firm's profits.

Limited Partnership

Limited partnerships are a hybrid of general partnerships and limited liability partnerships. At least one partner must be a general partner, with full personal liability for the partnership's debts. At least one other is a silent partner whose liability is limited to the amount invested. This silent partner generally does not participate in the management or day-to-day operation of the partnership.

Finally, the awkwardly-named limited liability limited partnership is a new and relatively uncommon variety. This is a limited partnership that provides a greater shield from liability for its general partners.

Taxes and Partnerships

There is no federal statute defining partnerships, but nevertheless, the Internal Revenue Code (Chapter 1, Subchapter K) includes detailed rules on their federal tax treatment.

Partnerships do not pay income tax. The tax responsibility passes through to the partners, who are not considered employees for tax purposes.

Individuals in partnerships may receive more favorable tax treatment than if they founded a corporation. That is, corporate profits are taxed, as are the dividends paid to owners or shareholders. Partnerships' profits, on the other hand, are not double-taxed in this way.

Advantages and Disadvantages of Partnerships

A successful partnership can help a business thrive by allowing partners to pool their resources and labor. Most sole proprietors do not have the time or resources to run a successful business alone, and the startup stage can be the most time-consuming.

Creating a partnership allows the partners to benefit from one another's labor, time, and expertise. Moreover, a shrewd partner can also provide additional perspectives and insights that can help the business grow.

But there is also an additional risk in joining a partnership. In addition to sharing profits, the partners may also assume responsibility for any losses or debts from the other partners. There is also a higher chance of conflict or mismanagement. When the time comes to exit, it may be harder to reach an agreement about selling the business.

Pros and Cons of Partnership

Partners can pool their labor, capital and expertise.

Partners can share tasks, allowing greater work-life balance.

More partners can bring their experience and new perspectives to the firm.

Partners may bring additional debts or liabilities.

There is a greater chance of disagreement or mismanagement.

It may become harder to sell the business.

The basic varieties of partnerships can be found throughout common law jurisdictions, such as the United States, the U.K., and the Commonwealth nations. There are, however, differences in the laws governing them in each jurisdiction.

The U.S. has no federal statute that defines the various forms of partnership. However, every state except Louisiana has adopted one form or another of the Uniform Partnership Act ; so, the laws are similar from state to state. The standard version of the act defines the partnership as a separate legal entity from its partners, which is a departure from the previous legal treatment of partnerships.

Other common law jurisdictions, including England, do not consider partnerships to be independent legal entities.

How Does a Partnership Differ From Other Forms of Business Organization?

A partnership is a way of structuring a business that involves two or more individuals (the partners). It involves a contractual agreement (the partnership agreement) between all of the partners that set the terms and conditions of their business relationship, including the distribution of ownership, responsibilities, and profits and losses. Partnerships outline and clearly define a business relationship and responsibility.

Unlike LLCs or corporations, however, partners are personally held liable for any business debts of the partnership, which means that creditors or other claimants can go after the partners' personal assets. Because of this, individuals who wish to form a partnership should be extremely selective when choosing partners.

If Partners Don't Have Limited Liability Why Set Up a Partnership?

Partnerships have several benefits. They are often easier to set up than LLCs or corporations and do not involve a formal incorporation process through a government. This has the added benefit of not being subject to the same rules and regulations that apply to corporations and LLCs. Partnerships also tend to be more tax-friendly.

What About Limited Partnerships?

In limited partnerships (LPs), there are general partners who maintain operations of the firm and have full liability, whereas limited (silent) partners, who are often passive investors or otherwise not involved in day-to-day operations, enjoy limited liability. A limited liability partnership (LLP) is different from an LP. In an LLP, partners are not exempt from liability for the debts of the partnership, but they may be exempt from liability for the actions of other partners. A limited liability limited partnership (LLLP) is a relatively new business form that combines aspects of LPs and LLPs.

Do Partnerships Pay Taxes?

The partnership itself does not pay business taxes. Instead, taxes are passed through to the individual partners to file on their own tax returns, often via a Schedule K .

What Types of Businesses Are Best-Suited for Partnerships?

Partnerships are often best for a group of professionals in the same line of work where each partner has an active role in running the business. These often include medical professionals, lawyers, accountants, consultants, finance & investing, and architects.

A partnership is a legal arrangement that allows two or more people to share responsibility for a business. Those partners share the ownership and profits, but they also share the work, responsibility, and potential losses. A successful partnership can give a new business more opportunities to succeed, but a poorly-thought out one can cause mismanagement and disagreements.

U.S. Small Business Administration. " Choose a Business Structure ."

Utah Department of Commerce. " Limited Liability Limited Partnerships ."

U.S. Congress. " U.S. Code, Section 26, Subtitle A, Chapter 1, Subchapter K: Partners and Partnerships ."

Uniform Law Commission. " Partnership Act ."

National Conference of Commissioners on Uniform State Laws. " Uniform Partnership Act (1997) ," Page 91.

Thompson Reuters Practical Law. " Partnership ."

Internal Revenue Service. " Tax Information for Partnerships ."

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Partner Business Plans in 2024: Why are They so Important?

A Partner Business Plan in 2024: Why is it so important?

Introduction

Business plans serve as a foundational framework that aligns the operational strategy of your partner firms with the overarching goals and expectations of your company. Tailored for each partner, these business plans outline specific sales, marketing, and training objectives that are designed to be in perfect sync with your organization's aspirations. These plans are indispensable tools for effectively overseeing your network, enabling you to evaluate and measure performance continually and, as needed, take strategic actions to bolster your partners on their path to success.

By collaboratively constructing business plans in conjunction with each partner, you foster a sense of cohesion within your indirect sales ecosystem. This shared roadmap ensures that all partners are working in synergy, collectively pursuing the identified actions necessary for accomplishing mutual success, further strengthening the strategic alignment between your firm and its partner network.

Develop Partner Bussiness Plan: Two Key Steps to Consider

1. know your partners well.

A thorough understanding of your partner network is a fundamental prerequisite for the successful development of partner business planning. Within your indirect sales ecosystem, business providers, integrators, value-added resellers (VARs), IT service companies, and resellers each operate within distinct logic and economic models. Acquiring deep insights into the nuances of each partner type is crucial for crafting business plans that align with both your partner's strategic objectives and your company's overarching goals.

Isabelle Castellanet, the founder of IXC, a firm specializing in Partners and Growth, emphasizes the importance of recognizing the diverse expectations and requirements of partners based on their typology. She notes, "Depending on the typology of its network, it is important to see that the partners do not expect the same information. A wholesaler, for example, does not require the same information and tools as a VAR, an integrator, or even a third-party publisher who prescribes or resells for you."

Recognizing these key elements in partner business planning ensures that your efforts are tailored to cater to the specific needs and expectations of each partner category, ultimately fostering a more productive and mutually beneficial collaboration.

2. Have a Well-Defined Global Business Objective

Creating a robust business plan in collaboration with your partner necessitates a well-defined and quantifiable overarching business objective. This objective must be crystal clear and expressed in measurable terms. For instance, it could be aimed at achieving specific milestones, such as:

Capturing more than 20% of the market share in France for your product;
Reaching an annual turnover target of "X" amount or;
Expanding your operations to attain 5% of the turnover in a new country.

This overarching business objective serves as the cornerstone upon which you will construct the business plans tailored for each of your partners. The core concept is to apportion individual objectives to your partners that harmonize with your global strategy. Consequently, each partner's unique business plan becomes an instrumental component contributing to the fulfillment of your company's overarching business objective. This strategic alignment ensures that the combined efforts of your partner network work in unison to advance your business toward its ultimate goals.

Establishing a Partner Business Plan: The Objectives

Setting objectives within your partner's business plan is essential, engaging, and decisive for the success of the partnership. Aligned with the main objective of your business, these objectives, whether quantitative or qualitative, must be measurable and, therefore, quantified.

Set Quantitative Targets

Based on a careful analysis of historical sales performance, specific criteria such as outcomes, geographical location, and seniority within the partner network, distinct objectives will be strategically allocated to each partner. These objectives encompass a variety of key areas that guide their contributions to the partnership:

Business Objectives on Sales Volume and Turnover: Partners will be tasked with well-defined business goals related to sales volume and revenue generation. These objectives may be tailored to the partner's track record, the market potential in their location, and their historical sales figures. This approach ensures that targets are realistic and achievable, motivating partners to excel in their specific market segments.
Marketing Objectives through Event and Webinar Organization: In addition to sales targets, partners will also be entrusted with marketing objectives, which often involve organizing events and webinars. These events serve as crucial touchpoints for engaging potential customers and driving brand awareness. The specific objectives may vary depending on the partner's strengths and past performance, encouraging them to leverage their marketing expertise to enhance the partnership's overall success.

By customizing these objectives based on partner history and characteristics, the partnership becomes more adaptable and efficient, with each partner playing a unique role in contributing to the collective success of the collaboration. This tailored approach maximizes the potential for growth and achievement within the network.

Set Qualitative Objectives

Incorporating qualitative objectives into your business plan imparts a heightened level of professionalism to your partner network. This is especially pivotal when embarking on new indirect sales partnerships. Training sessions play a central role in this process, serving as a crucial avenue for partners to equip their sales teams with comprehensive knowledge about your brand. These sessions not only elevate your partners' understanding of your products but also empower them to embrace and disseminate your vision over the short, medium, and long-term horizons. This alignment ensures that they are seamlessly integrated into your strategic framework. As an illustrative example, you may set a target, such as achieving a certification for a specific number of "X" sales, within your business plan.

To ensure the optimal monitoring of your business plan and to gauge the progress of your partners, it is imperative to implement KPIs. These quantifiable benchmarks enable you to assess the attainment of objectives, offering valuable insights into areas where potential refinements or additional support may be necessary. By embracing KPIs, you introduce a structured, data-driven approach that ensures the partnership remains on a well-tracked trajectory toward realizing the objectives outlined in your business plan.

Have Regular Monitoring

In pursuit of ongoing refinement and shared operational efficiency, it's essential that these objectives are periodically defined and subject to regular monitoring. Constructing a business plan without a system for ongoing objective assessment is a critical oversight, as it can become too late to take corrective action should your partner deviate from their established objectives. To ensure the long-term success of your collaborative efforts, it's highly advisable to assess and potentially adjust objectives on a monthly basis, accounting for variances such as weaker performance in a specific month, such as August.

KPIs play a pivotal role in facilitating the monitoring and analysis of your partners, allowing you to identify both their strengths and areas that may require improvement. With a monthly review and a systematic reporting mechanism, you gain the capability to:

Set Realistic Objectives : By closely aligning objectives with the current conditions on the ground, you ensure that they remain practical and attainable in the context of evolving market dynamics.
Monitor Implementation and Achievement : Regular tracking using KPIs enables you to gauge how well partners are executing planned actions and progressing towards the predefined objectives, offering insights into areas that might need attention.
Provide Support : Armed with this detailed data, you are better equipped to initiate timely and targeted actions that can help partners overcome challenges and, in turn, assist them in reaching their objectives. This proactive approach ensures that your partnership remains adaptive and robust, fostering sustained success in a dynamic business landscape.

The Essential Tool to Build a Business Plan and Manage it

In the endeavor to establish a comprehensive business plan and ensure its effective management with full transparency into your partner's activities, a PRM, or Partner Relationship Management system, emerges as the quintessential tool. Going beyond the capabilities of conventional management software, a PRM empowers you to systematically structure your indirect sales processes and engage with your partner ecosystem in real time, irrespective of the hour or location.

When crafting business plans for your partners within a proficient PRM platform, you can expect to benefit in several key ways:

Tailored Business Plans : A robust PRM system should facilitate the seamless definition of unique business plans for each partner, accommodating their specific objectives, strengths, and market dynamics. This tailored approach ensures that each partner's plan is finely tuned to optimize success.
Real-Time Progress Tracking : The PRM offers the invaluable advantage of real-time progress tracking for the objectives set within these business plans. It allows you to stay updated on your partner's performance, offering insights into their achievements and areas that might require attention or support.
KPI Integration : Effective PRM systems seamlessly integrate KPIs into the platform, providing you with a set of critical metrics that pinpoint what is vital for the success of your partner's business plan. These KPIs offer the ability to focus on the most significant aspects of your partnership, enabling data-driven decision-making and strategic adjustments as needed.

By leveraging a PRM , your business can optimize its partnership management, ensuring that business plans are not only efficiently established but also actively tracked and adjusted as necessary, fostering the mutual success of both your company and your partner network.

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Business Partnership Agreement Writing Guide

Since joining Business News Daily in 2015, Adam Uzialko has become a trusted resource for small businesses. As our Small Business Insider and an entrepreneur, he has spent thousands of hours researching and writing about the software and services entrepreneurs need most.

A business partnership agreement is a document that establishes clear business operation rules and delineates each partner’s role. These agreements are enacted to resolve disputes, delineate responsibilities, and define how to allocate profits and losses .

Any business partnership in which two or more people own a stake in the company should have a business partnership agreement. This legal document provides critical guidance in a company’s operations.

We’ll explore what a business partnership should include, as well as share resources and best practices for creating this critical legal document.

What is a business partnership agreement?

A business partnership agreement is a legal document between two or more business partners that spells out the business’s legal structure and purpose. It outlines the following information:

Individual partners’ responsibilities
Capital contributions
Partnership property
Each partner’s ownership interest
Decision-making conventions

The agreement also outlines what steps will be taken if one business partner decides to sell their interest or leave the company and how the remaining partner or partners would split profits and losses.

“I highly suggest formal partnership agreements are put in place as businesses evolve from solo practices into a partnership or ensembles,” said Rich Whitworth, former head of business consulting for Cetera Financial Group. “The biggest reason is that it establishes the ‘rules of engagement’ between the business and its owners … and lays out a road map on how to deal with entity-level issues.”

While businesses seldom begin with concerns about a future partnership dispute or how to dissolve the business, business partnership agreements are essential in situations in which emotions might otherwise take over. A written, legally binding agreement is an enforceable document instead of a spoken agreement between partners.

If you have an LLC , you’ll need articles of incorporation and an operating agreement to outline a business’s relationship with the state and the relationship between business owners.

How to write a business partnership agreement

A business partnership agreement must include all foreseeable issues regarding the business’s co-management. The easiest way to prepare a business partnership agreement is to hire an attorney or to find a customizable template. If you’re writing your own agreement, find a template for a company that’s similar to the business you’re starting .

A business partnership agreement should follow a logical process and include the following information:

Business generalities. Start by stating the business’s name , its legal structure and the business’s location (i.e., which state’s laws will govern it).
Business operations. State the partnership’s purpose, and explain the activities the business will and will not engage in.
Ownership stake. Spell out the percentage of the business that each partner owns. Enumerate each partner’s rights and responsibilities.
Decision-making process. Outline how decisions are made and the responsibility of each partner in the decision-making process . Include who has financial control of the company and who must approve the addition of new partners. Also include information on how profits and losses are distributed among the partners.
Liability. If the business partnership is set up as an LLC, the agreement should limit the liability each partner faces in the event of a business lawsuit . To do so effectively, a partnership agreement should be paired with other documents, such as articles of incorporation . A business partnership agreement alone is likely not enough to fully protect the partners from liability.
Dispute resolution. Any business partnership agreement should include a dispute-resolution process. Even if you’re working with family or best friends, disagreements are common in business.
Business dissolution. If one or more partners choose to dissolve the business, a business partnership agreement should outline how that dissolution will occur. It should spell out the procedures for partners to join or leave the partnership. It should also outline continuity or succession planning for partners leaving the business.
Explain how the partnership’s finances (including small business taxes ) will be managed.

Once you’ve spelled out everything in detail, each partner must sign the agreement for it to take effect.

To ensure your business partnership agreement adequately covers all business liabilities , closely involve your legal counsel while developing and reviewing the agreement, even if you’re working from a template.

The stages of a business partnership agreement

A business partnership agreement doesn’t have to be set in stone, especially as a business grows and develops. You’ll be able to add to the agreement, especially if unforeseen circumstances occur. According to Whitworth, there are four primary stages to consider.

Initial partnership: This stage involves creating the initial business partnership agreement as described above. You’ll draft an agreement that governs the business’s general operations, decision-making process, ownership stakes and management responsibilities.
Addition of limited partners: As a business grows, it might have the opportunity to add new partners. According to Whitworth, the original partners might agree to a “small carve-out of minor equity ownership” for the new partner, as well as limited voting rights that give the new partner partial influence over business decisions.
Addition of full partners: Sometimes you’ll want to promote a limited partner to a full business partnership. A business partnership agreement should include the requirements and process for elevating a limited partner to full partner status, complete with full voting rights and influence equal to that of the original partners.
Continuity and succession: At some point, founders may retire or leave the company without wanting to dissolve it. If you didn’t include continuity and succession planning initially, it’s crucial to outline your plan. Describe how ownership stake and responsibilities will be distributed among the remaining partners after the departing partners take their leave.

“Partnership agreements need to be well crafted for myriad reasons,” said Laurie Tannous, owner of law firm Tannous & Associates Inc. “One main driver is that the desires and expectations of partners change and vary over time. A well-written partnership agreement can manage these expectations and give each partner a clear map or blueprint of what the future holds.”

Succession planning is crucial to ensuring a business’s survival when a founder dies or an owner leaves the company.

Free business partnership agreement templates

Business partnership agreement templates are available for free online. These resources can help you draft your agreement, but you should have legal counsel review your draft and help you revise and finalize the document before you sign it.

Once a lawyer confirms that your business partnership agreement is thorough and legally binding, you and your partners can sign it to make it official.

When you’re searching for business partnership agreement templates, start with the following resources:

LegalTemplates.net
LegalContracts.com
TemplateLab

Business partnership agreement mistakes to avoid

Partnership agreements are complex documents. Unfortunately, many people get bogged down in details and make crucial startup mistakes in their partnership agreement.

Here are some common mistakes to avoid:

Skipping key details. Partnership agreements typically include some complex language around specific topics, and people may leave out this language if they don’t understand it. Don’t assume something isn’t necessary just because it reads like fine print.
Trusting things will work out. People tend to go into business with people they like and trust, leading them to think there won’t be problems later. A partnership agreement exists to resolve these issues when they inevitably arise.
Not having the agreement reviewed by counsel. Partnership agreements can vary by state and industry, and laws and best practices are constantly changing. If you choose not to have an attorney draft your agreement, at least have one review it before you sign the document.
Not amending the agreement later. Partnerships evolve, and governing documents must be updated periodically to reflect the changing business. Otherwise, there may be issues that the document can’t resolve.
Not forming separate partnerships for new ventures. Creating a business is expensive and time-intensive. Sometimes when a partner has an idea for a new business, their first thought is to make it part of their existing partnership. However, this keeps partners from compartmentalizing their liability. Often, their existing partnership agreement isn’t structured to govern new and different businesses.

Business partnership agreements formalize the relationship between partners and enumerate their rights and responsibilities. This limits partner liability and helps resolve disputes. Failing to draft an appropriate agreement can lead to problems later, including significant personal liability.

Why do you need a business partnership agreement?

A business partnership agreement establishes a set of agreed-upon rules and processes that owners sign and acknowledge before problems occur. If any challenges or controversies arise, the business partnership agreement defines how to address them.

“A business partnership is just like a marriage: No one goes into it thinking that it’s going to fail, but if it does fail, it can be nasty,” said Jessica LeMauk, marketing director at Voxtur. “With the right agreements in place, which I’d always recommend be written by a qualified attorney, it makes any potential problems of the business partnership much more easily solved and/or legally enforceable.”

In other words, a business partnership agreement protects all partners if things go sour. By agreeing to a clear set of rules and principles at the partnership’s outset, partners exist on a level playing field developed by consensus and backed by law.

Business partnership agreements level the playing field

A well-crafted, airtight business partnership agreement clarifies each partner’s expectations, duties and obligations. In business, things change constantly, so it’s crucial to establish a business partnership agreement that can serve as a grounding force in turbulent or uncertain times. A business partnership agreement also defines how the business should grow and governs the addition of new partners.

If you’re going into business with a partner, establish a business partnership agreement while incorporating as an entity. Even if it seems unnecessary today, when an issue arises, you’ll be glad you had an agreement in place.

Dock Treece contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

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What Is a Partnership Business Structure?

Last Updated March 29, 2022

Two female-presenting business partners looking over paperwork in front of a laptop.

Business structures help protect owners from liability and enable them to maximize the tax benefits of running a business.

A partnership business structure is one of the simplest ways for two or more people to run a business together.

The Most Common Business Partnership Structures

One of the first decisions business co-owners must make is what type of structure works best for their business. There are two common types of formal partnerships: limited partnership (LP) or limited liability partnership (LLP).

Limited Partnership (LP)

A limited partnership features a general partner who has unlimited liability, while all other partners have limited liability. The general partner is the operation’s hands-on person. Limited partners may be silent partners who help fund the startup of the business and are not involved with day-to-day operations.

Profits are reflected on the personal tax returns of all the partners. The general partner takes on the responsibility of paying self-employment taxes on partnership profits. Partners with limited liability also have limited control over how the company operates.

Limited Liability Partnership (LLP)

A limited liability partnership works in much the same way as a limited partnership. The key difference is that under an LLP, every partner has limited liability. An LLP separates every owner’s personal finances from those of the business. Personal assets—bank accounts, property, vehicles, etc.—are protected if legal actions are brought against the company. These assets are also protected against the company’s creditors or the debts of other partners. Most LLPs hire a business manager to oversee daily operations.

General Partnerships and Limited Liability Limited Partnerships

A general partnership does not require filing paperwork with the state. Typically, two or more people form a partnership by agreeing to a written partnership. The partners file taxes under their own names. A general partnership offers no liability protection, which is one of the main advantages people seek when forming a business structure.

The Limited Liability Limited Partnership (LLLP) structure is a recent addition to partnership types. An LLLP operates like an LP, with a general partner managing the day-to-day business. However, it also limits the general partner’s liability so that every partner has protection.

Who Should Form a Partnership?

A partnership works well for companies with more than one owner, professional groups that want the benefits of a partnership but don’t want to run the business (such as attorneys or doctors), or owners who want to try out a new business before creating a more formal business structure like an LLC or corporation .

Entrepreneurs may decide on a partnership business structure if their business falls into one of the following categories:

The business has multiple owners.
It is a low-profit, low-risk business.
It has a limited customer base.
It is an enterprise transitioning from a hobby into a business.

How Do You Form a Partnership?

A general partnership requires only a partnership agreement between two or more people. In theory, you could start a business on a handshake, but experts recommend a written agreement.

The other partnership structures (LP, LLP, LLLP) require registering with the state where the business is located. Forming these types of partnerships also require owners to establish certain aspects of a formal business, such as creating business banking accounts and obtaining required permits and licenses. Some states may allow a business to register online; others may require documents be submitted in person or through the mail. According to the U.S. Small Business Administration, most states also require registration with the secretary of state’s office, a business bureau, or a business agency.

Challenges of Forming a Partnership

Liability: General partners have unlimited liability, meaning they must carefully choose with whom they enter into a partnership since they are responsible for the partnership’s liabilities. In some cases, a creditor can pursue a single general partner for the obligations of the business.

Self-employment taxes: A general partner must pay self-employment taxes on income received through a partnership. A limited partner does not pay self-employment taxes on their share of a partnership’s income, but does pay self-employment taxes on any guaranteed payments, according to the IRS . Guaranteed payments involve payments for any services rendered to or on behalf of the partnership.

Advantages of a Partnership

Liability protection: This extends only to limited partners, not general partners in an LP structure.
Capital investment: Pooling the resources of the partners allows for creation of a better business than trying to run it alone.
Specialization: Either through a general partner or a business manager, partners can bring in professionals with expertise in business operations rather than try to run a business on their own.
Simple tax filings: Partnerships file Form 1065 and report income on their personal taxes, usually with a Schedule K-1.
Avoid double taxation: Profits pass through to the partners, rather than first getting taxed at the corporate rate as with a C corp.

Evaluating the requirements, advantages, and challenges of a setting up a partnership is essential before deciding if it’s the right legal entity for your business.

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Advantages and Disadvantages of a Partnership

Updated December 13, 2023 | Written by Mollie Moric Reviewed by Brooke Davis

A partnership is an unincorporated relationship between two or more individuals working together to progress mutual business interests.

Similar to a sole proprietorship, forming a partnership does not require establishing a business entity legally separate from the founders (though some states require partnership registration). In a partnership, each member contributes an investment of some form (money, property, labor, skills, contacts, etc.) and shares in the profits and losses of the business.

Before you and your partners sign the dotted line on your partnership agreement , it’s important that you first understand the advantages and disadvantages of business partnerships.

Advantages of a Partnership
Disadvantages of a Partnership

Do the Benefits Outweigh the Drawbacks?

10 advantages of a partnership.

Forming a partnership presents unique advantages that can affect every aspect of your business — from finances and taxes to work-life balance and productivity.

advantages and disadvantages of a partnership

1. No Additional Businesses Taxes

Although partnerships must file information with the IRS about their annual financial performance (revenue, profits, losses, gains, etc.), they don’t have to pay income tax at a business level.

Instead, a partnership “passes through” any profits — or losses — to the individual partners. In turn, all partners must include their share of profits or losses incurred by the business on their tax returns.

2. Access to Complementary Skills and Knowledge

A partnership can provide access to essential skills and experience — especially in areas you personally lack. Most successful partnerships work well because partners have complementary skill sets and help each other fill gaps in expertise.

For example, you may be experienced in sales and business development, whereas your other partners might be certified accountants or expert marketers.

3. Less Financial Burden

Overhead expenses are among the biggest challenges of building a new business. Sharing startup costs and other expenses with business partners is an attractive aspect of a partnership.

Additionally, having multiple partners enhances the company’s borrowing capacity as the risk is distributed among partners. Banks and other financial institutions are more inclined to extend credit to partnerships than to sole proprietorships.

4. Increased Business Opportunities

If your business partner is financially strong, they can help get more funding and cash for your business to explore new business opportunities. If your partners are experienced, they usually have important industry and community contacts that can benefit your business.

5. Better Work-Life Balance

A partner can help you shoulder a new business’s workload and other responsibilities. In this way, having a partner can improve your work–life balance — which studies have shown leads to increased productivity .

6. A Second Perspective

Business owners often get tunnel vision, focusing only on immediate challenges and missing out on potential solutions. A partner not only brings a fresh set of eyes but also their unique experiences and ideas, which can be invaluable.

This diversity in thought and approach can lead to innovative solutions and significant growth, helping your business evolve in ways you might not have imagined.

7. Fewer Formalities and Obligations

Unlike limited liability companies and corporations, some states do not require partnerships be registered with the Secretary of State. Most states legally recognize partnerships once they begin business operations.

There are also fewer ongoing requirements to comply with. For example, all LLCs are required to have a registered agent (which incurs costs yearly), and most states require LLCs to submit annual or biennial reports with a filing fee ranging from tens to hundreds of dollars. However, if your state does not require a business partnership to be registered, it requires minimal maintenance.

8. Easy to Convert to Other Business Structures

If you decide you need more protection for your business later on, converting your partnership into a limited liability company is fairly straightforward due to their similar structures of shared decision-making and flexible management.

The process is not overly complex, with most states providing clear guidelines and forms. These steps are manageable for partners experienced in handling business documentation.

9. More Control

While the operator of a limited company or corporation might be subject to the demands of shareholders or a board of directors, a business partnership involves more freedom. Members answer only to one another and don’t need to worry about external decision-makers.

10. Privacy and Confidentiality

Partnerships aren’t required to disclose their financial and organizational information publicly. Companies and corporations, on the other hand, must make this information available to the IRS and shareholders.

For example, a publicly traded company must distribute an annual report to its shareholders and post it on its website for the public to view.

7 Disadvantages of a Partnership

While partnerships enjoy certain freedoms, there are disadvantages as well. The disadvantages of a partnership highlight why selecting a trustworthy partner is vital.

1. Increased Liability

One of the major disadvantages of a general partnership is the equal liability of each partner for losses and debts.

Each partner has an unlimited personal liability, which means every partner is responsible for any bad business dealings the partnership enters into. Every decision your partner makes has potential consequences for your assets and finances.

For example, if the business has been unprofitable and you can’t make payments on a loan your partner took out, creditors might sue you and take your personal assets such as bank accounts, cars, and houses.

2. Less Autonomy

Partners have equal decision-making power (unless otherwise specified in the partnership agreement). Most decisions are made jointly, so you sometimes have to compromise.

To avoid this issue, some partners decide to allow each individual partner have the sole authority to make decisions on behalf of the partnership on specific subjects (e.g. hiring; borrowing money).

3. Potential for Conflict

Partnerships, like most relationships, can quickly become complicated when associates disagree. This is especially true if there are only two partners without anyone else as a tie-breaker in a disagreement.

It’s important to outline how disputes will be solved in your partnership agreement.

4. Complications with Future Sale

When forming a partnership business, work an exit strategy into the documentation. Issues can arise when one partner wants to sell and the other doesn’t.

Typically, if an associate is interested in leaving the partnership, they use an assignment of partnership interests to transfer the right to receive benefits to a new partner. However, this can introduce a range of complications that affect the dynamics within the business.

The existing partners may not have an existing working relationship with the new partner, who could be a complete stranger to the team. Differences in work ethic, management style, and business philosophies between the existing partners and the new partner can create friction.

If that’s something you’d like to avoid, make sure your partnership agreement contains the right of first refusal so that the original partners have a right to purchase the interest before an outside party.

► READ MORE: How to Transfer Business Ownership

5. Lack of Stability

Partnerships, known for their flexibility, lack the inherent stability of incorporated organizations. The business’s reliance on its partners means that life events like death, birth, illness, or departures can significantly impact its operations.

Under the Uniform Partnership Act (UPA) , a partnership may dissolve (under some state laws) if a member leaves, unless there’s an agreement to continue.

Make sure you discuss with your parnter how to handle such life events and address them clearly in the agreement.

6. Perceived Lack of Prestige

For many, a formal business entity structure is a sign of prestige. While some informality can be attractive for those involved in the organization, it can worry investors looking to put money in or collaborate with the business.

7. Shared Profits

Partners must share profits like they share labor and overhead expenses. While a partner means more opportunity to generate increased revenue, it also means that revenue must be shared according to the terms of the agreement.

Choosing the right business structure for you and your business can be challenging. There are some distinct advantages a partnership can bring— freedom and flexibility being chief among them.

On the other hand, choosing a limited company or corporation business structure can help you avoid the associated disadvantages, such as the unlimited liability you bear as an individual.

Having a well-drafted partnership agreement is essential in minimizing potential issues a partnership may have. Join over 500,000 monthly users and create your partnership agreement with us.

Mollie Moric

Legal Content Writer

Mollie Moric is a staff writer at Legal Templates. She translates complex legal concepts into easy to understand articles that empower readers in their legal pursuits. Her legal advice and analysis...

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The true value of great partners (in life and business).

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Executive Vice President of Sales at NAVCO , leading the company’s strategic sales growth and team for the company in North America.

Our company just finished our National Kickoff Meeting last week, and I would say it was one of our absolute best. These are annual, week-long events with our sales, operations and finance teams and our vendor partners to dive deeper into key areas of focus and collaboration. The partnership aspect is what makes it incredibly special. We meet alongside our peers, leaders, and favorite product lead partners, with whom we always enjoy spending time, and we get to hear more about the amazing things they are doing.

Partnership can mean a lot of things, and what makes a good partner versus a less-than-good partner varies. I have always believed the best partners are looking for your win along with their own. Less-than-great partners might just be the ones that only call when it's time to get forecasts, price increases or even billings to finish out a month or quarter for their own paycheck.

I am sure you can think of a few of the greatest partnerships in recent history like Lennon and McCartney, Sonny and Cher and Superbowl champs Patrick Mahomes and Travis Kelce. And who can forget tech geniuses like Bill Gates and Paul Allan and Steve Jobs and Steve Wozniak, who have changed our world as we know it? Just think what Elon Musk could do if he had that kind of partnership. We might already be on the moon.

Partnerships can also reflect great companies working together with a common goal in mind, where the best of two is better than one. A sense of loyalty is created, a long-term vision is embraced, and their team feels like your own team. That is when you know you have found a great partnership. Results are important, but the journey of working together can also be what ultimately makes it special.

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In working with different partners, I've homed in on two main strategic areas of focus that typically result in a successful relationship: consistency and loyalty.

Consistency

Why is consistency important when it comes to partnership? They are the ones that always show up for you, have your back and go the extra mile. The ones that will stay late to get you what you need or even work on the weekend to make sure that what you ask will get done not only for you but also for your customers. I heard that this week in our meeting, where we won a million-dollar customer just because our partners—operations, purchasing and our vendors—went the extra mile.

In the security world I live in and sell in, I am the middleman or woman—an integrator. I am in the middle of the chocolate pie, laughing. Isn’t that the best part anyway? We are the ones who receive the product from one company, then design, install and service it. Our loyal partners tell me, "Angie, I am always going to use an integrator for my jobs or embrace the middlewoman or man." The other option in our world would be to go directly to the consumer or end user. That is like if you went and bought your weekly groceries off the truck before they ever made it into the grocery store. The grocery store would never have any product. Now, understand it would be cheaper, but not the experience you were looking or hoping for, and grocery stores would cease to exist.

The companies that choose to go direct may not make them a bad partner, just not the right one for us. The partnerships where we have loyalty will keep me calling them whenever I have a need or an opportunity because they first showed me their loyalty consistently.

What does loyalty mean to me? It is the partner who says, "I brought you to the dance, and you're the best dance partner!" Take time to find those people who are not always looking for the better offer or dance partner when times get tough or the shine has worn off but rather those who bring you with them because you were already the best two-stepper out there. In other words, loyal partners aren't always looking for the next best thing; they trust in your abilities and are more willing to nurture the relationship they have with you .

Business partnerships can look different from working with your internal teammates or your best vendor partners, but great partnerships always start with you. Set the benchmark with your communication, loyalty and consistency to let your partners know you have their back or will go the extra mile because your partnership is important. Also, be sure to recognize when a square peg does not fit in a round hole so you can keep searching for the perfect fit. Compromising in partnership and alignment is never a good option or one that will last as long as the wonderful ones I can truly call my own.

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Business organizations in Mongolia show commitment to advancing human rights in partnership with UNDP

April 17, 2024.

Ulaanbaatar, 17 April 2024 – The UN Development Programme’s Business and Human Rights (B+HR) Global Project supported by the Government of Japan, co-organized a forum on “The Responsible Business and Human Rights: Showcasing Commitments and Results by Private Sector” with the Mongolian National Chamber of Commerce and Industry (MNCCI), showcasing the outcomes of the B+HR Global Project. Diverse stakeholders, including representatives from government, business organizations, associations, chambers of commerce and industry, and academia, convened to discuss the project’s impact and future partnership opportunities.

In 2023, Mongolia became the fourth country in the Asia-Pacific region to adopt the National Action Plan on Business and Human Rights (NAP), marking its commitment to implementing UN Guiding Principles on Business and Human Rights, promoting responsible business conduct, and achieving the Sustainable Development Goals. The NAP plan outlines strategies to strengthen the legal framework, provide practical guidance through human rights due diligence tools, strengthen stakeholder capacities, and improve access to remedy mechanisms.

Participants at the forum shared best practices regarding the responsibilities of enterprises to respect, ensure, and protect human rights, as included in the NAP’s timeline for implementation from 2023 to 2027. Acknowledging the impact on global supply chains, business organizations committed to fulfilling their obligations. In addition, the B+HR Global Project provided a series of human rights due diligence training to 600 business organizations and conducted individual guidance sessions on rapid human rights risk assessment for 12 selected companies, thus advancing the NAP’s objectives.

“The private sector plays a vital role in advancing the UN Guiding Principles on Business and Human Rights as well as the Sustainable Development Goals. The Commission will actively engage in capacity-building initiatives with the private sector, fostering close collaboration to advance human rights" stated Ms. Sunjid Dugar, the Chief Commissioner of the National Human Rights Commission of Mongolia, during her opening remarks.

In its commitment to promoting responsible business, the government of Japan has been actively promoting human rights standards in 15 countries worldwide through this project in partnership with UNDP over the past few years, with Mongolia standing as one of these countries.

His Excellency Mr. Igawahara Masaru, the Ambassador Extraordinary and Plenipotentiary of Japan to Mongolia, lauded the collaborative efforts and stated “We aim to to deepen our collaboration with UNDP and other partners to further support Mongolia’s ongoing efforts to tackle development challenges”.

Ms. Matilda Dimovska, UNDP Resident Representative in Mongolia, expressed her deepest gratitude to the Government of Japan for their significant support in advancing human rights within Mongolia’s private sector and encouraged partners to collaborate on ensuring that profit and prosperity are in harmony with respect for human rights in Mongolia.

UNDP is the leading United Nations organization fighting to end the injustice of poverty, inequality, and climate change. Working with our broad network of experts and partners in 170 countries, we help nations to build integrated, lasting solutions for people and planet.

For further inquiries:

Delgermaa Altangerel | Communications Analyst | UNDP in Mongolia | [email protected]

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While it found that 93% of couples share similar goals for retirement and agree on when to retire, 24% of respondents said they have not come to an agreement on how much money they will need to save or how much they should spend on children and grandchildren, both today and as part of their estates.

In fact, more than half (52%) of couples surveyed said they have not yet set up an estate plan.

Marcy Keckler, senior vice president of financial advice strategy at Ameriprise Financial and a certified financial planner, offers the following advice for couples who still need to set up an estate plan:

1. Don’t be intimidated by the concept of estate planning

“Estate planning is for everyone, no matter their wealth or complexity of their financial situation,” Keckler told FOX Business.

“At some point, all of us will need an estate plan.”

She explained that, at its core, estate planning is about making decisions about what you want to happen after you die or in the event you’re incapacitated and can’t make health-related or financial decisions on your own, even temporarily.

2. Engage professionals

“A qualified financial adviser and estate planning attorney can help you initiate important, yet often emotional conversations and ensure you have decisions documented to cover a variety of potential scenarios that may arise,’ Keckler said.

“Guidance from professionals can ensure your wishes for the legacy you want to leave your heirs and other loved ones are carried out.”

Keckler recommends selecting professionals willing to collaborate, noting that one of the biggest mistakes couples can make is creating a will that specifies beneficiaries and then forgetting to update their accounts to actually identify the correct beneficiary.

She added that financial advisers and attorneys can work together to help ensure you’ve taken all the steps necessary to have your plan executed according to your wishes.

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3. Once you complete your estate plan, be proud of yourself

“ Estate planning is an important part of protecting your family and financial legacy,” Keckler said.

“It’s a big accomplishment that should be celebrated once it’s completed.”

She recommends ensuring you know where the original documents and any physical or digital copies are, so you can refer to them in the event they become needed.

“If you have a doctor or hospital of choice, send them a copy, so they can keep it on file,” Keckler suggested.

“This can save valuable time and stress you or a loved one would otherwise spend trying to find them in an emergency.”

4. Revisit your estate plan at least every five years, and more frequently if a big life event happens

“Estate plans need to be updated as your life evolves to ensure they reflect your wishes,” Keckler added.

“Moments in life such as the birth of a child or grandchild, major shifts in income, a divorce, acquisition of new property and a child reaching the age of 18 are a few examples of when your estate plan may need to be revisited.”

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