5.04 – Working With A Limited Number of Other People
Starting a business with others can offer significant benefits. You gain the advantage of having someone to share the journey with, especially when challenges arise. Additionally, the collaboration can provide a broader range of skills and resources, which are invaluable from the start.
However, working with others also brings the potential for conflicts, differing viewpoints, and misunderstandings. It’s essential to balance these dynamics to ensure a productive partnership.
Taking On An Existing Business
If you don’t have a solid business idea or strategy, consider taking over an existing business. This can be like a “business-in-a-box,” where you buy an established venture and start trading. While this simplifies some aspects, it’s not entirely without challenges. Network marketing, franchising, and co-operative ventures are examples of this approach.
Forming A Partnership
A partnership essentially combines the resources and skills of two or more sole traders. This structure has several advantages:
- Pooling Resources: More capital and diverse skills.
- Continuity: The business can continue even if one partner is temporarily unavailable.
However, partnerships also have their challenges. Here are some key points to consider:
- Equal Responsibility: Each partner is equally liable for business debts, which means one partner’s mistake can impact everyone.
- Shared Financial Risk: A partner’s personal bankruptcy can jeopardize the partnership.
- Exit Strategy: If a partner leaves, the remaining partners need a clear agreement on how to value and handle the departing partner's share.
It’s crucial to have a written partnership agreement to outline how profits, losses, management duties, and other essential aspects will be handled.
Looking at limited partnerships
A limited partnership can mitigate some of the risks of a general partnership. In a limited partnership, there are general partners who manage the business and have unlimited liability, and limited partners who are typically passive investors with liability limited to their investment.
This structure allows for raising capital without adding active partners and can be particularly useful for financing business expansion.
Checking out co-operatives
If profit is not your primary motive and you are interested in ethical business practices, a co-operative might be the right choice. Co-operatives are autonomous associations where members work together to meet common economic, social, and cultural needs through a jointly owned and democratically controlled enterprise.
In the UK, there are over 7,000 co-operatives with 14 million members, contributing £38 billion to the economy annually. You need at least seven members to start a co-operative. While registration with the Chief Registrar of Friendly Societies is not mandatory, it offers limited liability protection similar to a limited company.
For more detailed information about forming and operating a co-operative, you can visit the UK Co-operative website.
Additional Considerations
Communication: Clear and frequent communication among partners is crucial to avoid misunderstandings and ensure everyone is aligned.
Conflict Resolution: Establish mechanisms for resolving disputes to maintain a healthy working relationship.
Defined Roles: Clearly define each partner’s role and responsibilities to prevent overlap and ensure accountability.
Legal and Financial Advice: Seek professional advice to navigate the complexities of forming and running a partnership or co-operative.
