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If you’re starting a small business, you’ll have to go it alone or get a partner to help you make your company a success. Here’s how to decide which to do.
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If you want to start a business, you’ll need to decide whether to move forward on your own or team up with others to try to form a company and make it successful.
About 73% of people who start companies go it alone and operate as sole proprietorships. But, while operating on your own is common, many people who move forward with small business ownership have at least one partner on board to help them get their company off the ground. In fact, around 8% of businesses are organized as partnerships.
But is this the right move for you? Here are the pros and cons of starting a company with a partner instead of moving forward on your own.
Pros of starting a business with a partner
Here are some of the biggest benefits of starting a company with a partner:
You can share the risk: Around 20% of businesses do not survive their first year, while 30% are gone by year two, and half of all companies have folded by their fifth year. If you start a business yourself, you take on the full personal and financial risks associated with business failure. If you have partners, you can share the start-up costs and share the risk so you won’t lose as much if your company doesn’t succeed.Your partner may have different strengths: Running a business requires many different skills including marketing, accounting, budgeting, future planning, and of course providing the goods or services your company was created to offer. Most people don’t have all the skills needed to be successful on their own. You can find a partner who brings skills to the table you don’t possess.You won’t have to do all the work yourself: Research shows many small business owners work 60 hours a week or more, with the majority working on some weekends and even while on vacation. Running a business takes a ton of time and dedication. If you have a partner, you have someone to share the work with so you can still have a life.
Cons of starting a business with a partner
There are also some big downsides to starting a business with a partner, including the following:
You’ll need a partnership agreement: While states typically do not require you to create a partnership agreement, you should make one anyway. This is a binding contract between you and your partner that sets forth the terms of the relationship. This way, you can get on the same page about important issues like how profits should be shared and who will be responsible for specific business tasks.You have to share the profits: If you have a partner you’re working with, they will need to receive some of the company profits as well. This can mean less money going into your personal bank account. Of course, ideally, your partner will be bringing in additional income so there should still be plenty of money to go around.Disagreements could arise: When you are working with someone else, you don’t get to make all the decisions. Conflicts could arise and you may not always get to do things the way you would prefer.
Ultimately, you will need to weigh the pros and cons and decide if you are better off going it alone or working with someone else. If you have someone else you trust who wants to work with you in a business endeavor, this can be a great option. But think carefully about whether you want your future earnings to be solely in your hands or whether having someone backing you up feels like a better choice for you.
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