Partnership agreement in real estate and every other Business type is most crucial to its success. This single discussion can either determine the success or failure of the business. A business partner can be an individual or company, however, the most common type of partnership is the coming together of two or more individual to form a company or to join an already existing company.
WHY DO PEOPLE GO INTO PARTNERSHIP?
Having a business partner is not compulsory when going into real estate or any other business if you are capable enough to a handle every skill and challenges the business presents. The reason for partnership in most businesses is either for financial support, value/strategy, support or skills.
FINANCIAL SUPPORT: Most businesses are faced with financial challenges that might cause the winding up of the business. To avoid this, most business owners find a partner who can bring the needed capital for the sustainability of the business.
VALUE/STRATEGY: For a business to thrive through season and time, its value and strategy must be sustained. Most organization in a bid to re-invent themselves seek partnership with people that can, bring new opportunities, connections, ideas, uniqueness re-packaging solutions, advice, make decisions, determine the right investment plan or draw up a long or short-term business strategy for the success and continuity of the business.
SUPPORT: Managing a business can be so cumbersome and stressful for one person to handle alone. Therefore, most business owners seek partnership with other people so that such business will not suffer.
SKILLS: There is a popular saying “you can’t have it all”. A business owner might not have a particular skill needed for the optimum success of his business hence, having a partner with complementary skills can push such business in directions one may not have been able to do alone.
THINGS TO CONSIDER BEFORE GOING INTO A REAL ESTATE PARTNERSHIP AGREEMENT
REASON FOR PARTNERSHIP: Before going into a partnership agreement, the first thing to do is to identify why you need a business partner. Like I stated earlier, there are so many reasons why people go into partnership.
DEFINE ROLES AND RESPONSIBILITIES: Identifying the reason for partnership in a real estate business makes it easy for you to define the roles and responsibilities of a partner. Defining the roles and responsibilities of a partner should be determined on individual strength, weakness and competency
PARTNERSHIP DURATION AND COMMITMENT: When entering into a partnership agreement, the amount of time, commitment and duration of partnership should also be considered. This however depends on the roles and responsibilities of the partner(s) in the business/company. For example, when you enter into a partnership agreement for the purpose of raising capital, it is important to agree on how much financial commitment such a partner must make to the business. For other partnership purposes, it is important to state the amount of time such partner(s) is to put into the business (full time or part time, daily, weekly or monthly) and how long the partnership agreement is to last.
PERCENTAGE OF PROFIT AND LOSS: Most partnership agreements are entered into for the purpose of making profit which is why it is important to put into consideration how the partners will split the business profits, how much each partner gets paid for and who will get paid first. In every business, there is also the risk of loss that is why it is important to not only outline how profits will be distributed, but also how each partner shares the loss of the business.
SEEK LEGAL ASSISTANCE:
It is advisable to seek legal assistance before entering into a partnership agreement. Seeking legal assistance helps prospective partners draw up a good business structure that promotes healthy communication relationship, prevent future disputes, aids an agreeable distribution of control, profits and ensures a fair division of responsibilities.
PROS OF HAVING A BUSINESS PARTNER
- Shared responsibilities and work.
- Shared business risks and expenses.
- Complementary skills of each partner can lead to the achieving greater financial results
- Mutual support and motivation.
- Additional capital infusion increases stability
- Extended business network opens more door
CONS OF HAVING A BUSINESS PARTNER
- Shared total control over the business.
- Shared profits.
- Jointly and individually liable for the business activities of one another
- Longer time in decision makings because of differences in opinion
- Risk of conflict
For further assistance or consultation on this article or other issues, feel free to contact me. Email [email protected] or Call 08034869295.
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