Five Myths About Business Partnerships – Arizona
June 16, 2021
Five Myths About Business Partnerships – Arizona
A partnership is one of the most common types of business structures, and it can be a good fit for many businesses. One partner can bring skills to the table that another lacks, as well as share the financial risks that come from running a company. Of course, there are downsides to partnerships as well. In particular, disputes can arise that could eventually lead to causing the partnership to break down possibly ending up in litigation, although a good partnership agreement drafted by an experienced business attorney can head off many of these problems.
If you’re considering forming a partnership, don’t be taken in by any of the following myths.
Myth No. 1: Partners Always Complement One Another
It makes sense to form a partnership with someone who has different skills. For example, you may have a lot of sales and marketing experience but a limited operational background. In that situation, perhaps you would seek out a partner with extensive experience in operations, with the idea that each of you will focus on your area of expertise.
Although this arrangement can work well, it can also backfire. A partner with different skills might also have different priorities, which means you may disagree on (for example) how much time and money should be spent on sales and marketing vs. operations. These conflicts can derail the business if they aren’t managed carefully.
Myth No. 2: Partners Always Have Shared Goals
Obviously, two partners will always have one shared goal: the success of the business. However, you may not agree on what success looks like and how the company should get there. For example, you may both start out single and work 80-hour weeks. But what if one partner gets married and has children?
Their priorities are likely to change, and they might want to work fewer hours and take fewer business risks. That partner will probably seek to maintain a steady income and forgo high-risk, high-reward choices you may still be comfortable with. As a result, it’s important to discuss priorities before forming a partnership, including what decisions will be made if life circumstances change.
Myth No. 3: Spouses and Life Partners Won’t Affect the Business
Everyone talks about their job with their spouse or life partner, including all of the frustrations and difficulties that come up. Those people will have opinions that will influence your business partner(s). This could lead to problems down the road if a partner’s spouse says, for example, that they’re working too hard or aren’t being paid enough.
Myth No. 4: Having a Written Partnership Agreement Will Make Things Overly Complicated
On the contrary, not having a partnership agreement can lead to serious problems in the business relationship and could even derail the business altogether. A partnership agreement is like an instruction manual that lays out the rights and responsibilities of the partners, as well as how to handle disputes, the death or disability of one of the partners, or an ownership change.
Although a written partnership agreement is not required in Arizona, we strongly recommend one to help keep everyone on the same page and prevent confusion and mistrust. Not having an agreement can also lead to more serious problems, including the liability to third parties and lawsuits between business partners. However, it’s important to note that a formal partnership agreement will not ensure better communication and performance; that’s up to the partners themselves.
Myth No. 5: An Employee Will Work Harder if You Make Them a Partner
Making an employee a partner does not fundamentally change them or their work ethic. If an employee currently has a poor work ethic, making them a partner won’t change them and they may even start to resent all of the new work involved with being a partner, which may lead them to shirk their responsibilities or quit altogether. As a result, instead of bringing in one or more new partners, it might make more sense to arrange an alternative such as profit sharing.
Contact Counxel Legal Firm
These are just a few of the myths surrounding partnerships. If you would like advice about starting a partnership or resolving a partnership dispute, contact Counxel Legal Firm at 480-536-6122 or at firstname.lastname@example.org.
This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Use of and access to this article does not create an attorney-client relationship between you and Counxel Legal Firm. Please contact email@example.com or 480-536-6122 to request specific information for your situation.
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