subject: Business Partnerships – Are They All Made The Same? [print this page]
Over the years I've become very attuned to these words and have discovered that, depending on the circumstances and who is speaking, the definitions can be drastically different. The meaning however, is very similar.
Employers sometimes call their employees "partners", businesses talk about having a "partnership" with their suppliers or how they "partner" with their clients. Business owners' talk about "partnering up" with other business owners to achieve something greater than they can achieve on their own, but even that can take different forms and definitions.
The meaning most people are attempting to convey when they use the words partner and partnership is one of cooperation, collaboration, and working together toward a common goal. It's the concept of synergy where as Aristotle so aptly stated, "The whole is more than the sum of its parts". (Just note however, that the actual definition of the word or phrase used, can have legal meaning that is not necessarily intended by the speaker, yet can be inferred by the listener.)
Over the next couple of blogs, I'd like to have a conversation about the different kinds of partnerships in business and what makes them unique. To get the conversation started, let me list a few of the different kinds of business partnerships and pose some questions. There are:
Family businesses husband/wife, siblings, multi-generational or any combination where different family members have an ownership stake in the company.
Strategic Alliance a formalized relationship between two parties to pursue a specific endeavor or set of objectives while remaining separate entities.
Joint Venture a strategic alliance where the two businesses create a separate legal entity for a specific venture.
Investor someone who contributes capital to the company for an equity stake. The investor can be active whereby they take a role in management, or a silent partner with no active role in the company
Professional Service firms Law firms, CPA firms, etc.
General partnership two or more people who agree to go into business together as co-owners. These are often start-ups but could also apply to existing business deciding to merge into one entity
Are the challenges the same for each of these types of partnerships? How about the drivers for success are the elements the same for Creating a great business partnership? Should you conduct the same level of due diligence before entering a family business versus a general partnership, for example? Are the consequences the same for success or failure of the different kinds of partnerships? Are the criteria for making partner in a law firm the same used by a business looking for an investor, or a strategic partner?
While it's not my intent to make this a conversation about the legal and tax implications or the various legal structures; I do invite attorneys and accountants to weigh in!
Business Partnerships Are They All Made The Same?
By: Barri Carian
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