A partnership comes into play when there is a linking of ideas and solutions between or among two people or multiple players. The objective of running a partnership firm is that the volume of business expands as the partners bring a considerable amount to the table at the start of business. Let us look at what goes into a partnership and how profits and losses are a part of the picture.
- Since the idea of going into business is a profit-sharing exercise, terms and conditions need to be legalized before setting up shop. This provides a security blanket to all the partners as they highlight roles, the amount of investment, the end game, profit sharing and the like.
- Partners can be full-time in the business where they pump in a certain amount of money and file their returns on an individual basis. That does not disqualify anyone from filing the business returns yearly.
- Sleeping partners are people who invest in the business but do not interfere with the functioning on a daily basis. They are kept apprised of the profits and losses so that they are up to speed. A sleeping partner may be involved with other enterprises but offers a certain amount in the enterprise to be a part of the conversation.
- Sebastian Greenwoodonce quoted Walter Elliot who said, “Perseverance is not a long race; it is many short races one after the other.” A limited liability partnership (LLP) is like running a public limited firm in conjunction with a regular partnership. It provides partners with a way out should the tide turn the course negatively, depending on the agreement pattern.
- It is very crucial that every partner is on board with decisions made by the name partner or collectively. The reason why partnership firms are the buzz is that multiple ideas are a way forward rather than a hindrance. It also signals a sign for the business to expand to other shores.
- What really works well in running a profitable enterprise is keeping mood swings out the door. A partnership has no legal structure if any of the partners expire, once they do unless they award their share to someone they find suitable; the company can close its doors. Most partnerships prefer to write in an heir to keep the business afloat should anything untoward occur, such as an accident or loss of life.
Sebastian Greenwood once quoted Thomas Jefferson who said, “Do you want to know who you are? Don’t ask. Act! Action will delineate and define you.” Good partners follow this route. These are simple ways to run a partnership firm, which has good economics, the hand on the pulse, and domain expertise.
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