Partners are always earlier to success?
On the road to business success, you will meet many people. Business partnerships thrive on mutual benefit and mutual interest, and if you are not compatible, it is best to walk part ways. Working with friends can save time on the initial stages of getting to know each other, and trust is higher. However, it is important to balance rationality and emotions. There are three common ways of collaborating, and it is advisable to weigh the pros and cons and consider the risks before making a decision!
(1) Unlimited company
An unlimited company is a quick and cheap way to partner up and start a business. For example, IG Cake Shop and makeup companies use this form of company. The process of setting up an unlimited company is simple, and it does not involve shares. However, be aware that if the boss, A, does business in the company’s name and suffers losses or debts, the other partner, boss B, is equally responsible. As it is an unlimited company, if the company is unable to repay its debts, the partners’ personal assets will be affected.
In addition, disagreements are common in business. As soon as one party verbally says “I am out” or “let’s separate and operate individually,” as long as someone can testify to this, the partnership will end immediately. If the argument is settled, and there is a profit, things can go back to normal. But if there is a significant loss, and interests are at stake, things can become difficult.
(2) Limited company
A limited company is established, and the bosses can exercise the decision-making power though the owning of shares. Although annual audits increase costs, if the business fails and needs to be liquidated, shareholders will only lose their investment, and they will not need to repay it with their personal assets. However, there is no surefire formula for success in business; right or wrong depends on perspectives and angles. When working as friends, there is mutual sympathy, but when working as business partners, there may not be a consensus. During the company’s development process, if there is a difference in pace or deviation in ideas, and disagreements arise, as long as one party buys the other’s shares, the “breakup” will not be a complete failure. Of course, stubbornness and refusal to sell are common. Doing business is a numbers game, and besides financial strength, bargaining power is crucial. It is best to leave it to a professional accountant.
(3) Cooperative project
In fact, there are many ways to cooperate, and sometimes, keeping a distance provides more space and “flexibility.” For example, if you have rich sales experience, and you have a business opportunity, you can outsource the production work to a friend with relevant experience. Before starting work, agree on how to split the bill, and once the order is completed, the money is shared equally. If the cooperation is pleasant, you can continue to work together. If there are disagreements or financial issues, it is easy to cut ties with a project-based cooperative relationship, and even if things go wrong, it is just an experience learnt. It is unlikely to end up in court.
Friends and business partners need to distinguish between the public and private spheres! After all, “clearly separating public and private affairs” is not easy to say, and you can easily “win the battle but lose a friend,” turning good friends into mortal enemies.
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