There may be 50 ways to leave your lover, but there are only three ways to own a business.
The easiest way is to open a proprietorship – and that means just you. Many new business owners choose to open a proprietorship when they break away from their job to be their own boss. Unfortunately often their dream of freedom ends with many clients and creditors who are happy to fill in for their boss.
Proprietors can open up shop as simply as telling their neighbor. Good service and word of mouth can then grow a small business. The successful proprietorships are, however, more like other businesses with team and systems.
Big businesses and many ambitious little ones are incorporated. The benefits are many. Lower income taxes are geared to help small businesses invest and grow. Liability to the owner is reduced to the extent that he does not agree to any personal guarantees. But, arguably the biggest benefit of a company is that it gives a business substance. This is much easier to manage than a proprietorship, which tends to bleed back and forth into the owners personal life.
An intermediate level of ownership is a partnership. The owner joins forces with one or more other people but doesn’t actually incorporate the business.
Partnerships are common in the professions. My accounting practice is one. Ever growing complexity of income taxes, technology and business landscape make it impossible for one person to know it all. My partners and I lean on each other regularly to help solve problems for our clients.
Care needs to be taken, however, to find the right partner.
- How do I know that I need a partner? This needs to be the first question. If you are happy with being a proprietor and are able to solve all of your business challenges yourself and would prefer to hire for your blank spots, likely a partnership isn’t for you. If you would like a potential equal to help you with your business problems and share the pain and the gain, then a partnership could be the answer.
- How do I pick my partner? I think that we can all agree that you have to be compatible with the person. Not best friends, but able to get along. And then consider the big question – would our businesses work better together or better apart?
- Should we go fast or slow? I would advise you to take your time and get to know them. Try things out before the formal arrangement. Things will be clearer over time.
- When should we plan for when things go wrong between us? Before you start. Absolutely. And we’ll discuss how to do that in my next post.