Starting a partnership
Starting a partnership means you’ve decided to share ownership of your business with at least one other person.
You’ll also share the business’ resources and combined skills. In return, all partners will split the profits and contribute to the losses.
Partnerships are most common in professions such as law, accountancy and farming.
If you think a partnership is the right business model for you, make sure you get familiar with everything that this involves.
This includes:
- partnership agreements
- hiring staff
- registering with government agencies
- protecting your intellectual property
- understanding how to stay on top of your finances.
Setting up correctly at the beginning will ensure you’ll stay on track and be successful in the long term.
Efficiency and innovation for your partnership
Making your operations more efficient can help you reduce costs and increase your output – and operational innovation goes even a step further.
Being in a partnership means each partner can use their individual knowledge and skillset to focus on a specific goal, for example, product innovation, marketing and sales, or business operations.
This can:
- create a competitive advantage
- better meet customer needs
- make you stand out in the market.
Consider innovating your business processes if your current ones are already optimised, or your products and services if your customers’ needs are changing.
Strategically scaling up your partnership
Growing your partnership strategically, both in New Zealand and overseas, can help you:
- boost your revenue
- perform better than your competitors
- stay on top of demand and adapt to changing consumer needs
- build resilience for the future.
You can make the most of being in a partnership by assessing partner networks and existing business relationships for opportunities.
For example, there might be a partner in a different physical location that could help enter new markets domestically or internationally.
It’s important to have clear goals on why you want to grow.
Consider things like how you’ll finance your growth, and why and where you want to expand. You’ll also have to identify the growth strategy that works best for you, and make sure you’re aware of the challenges you might face.
Closing down your partnership
Closing down a partnership, or having a partner leave, can be a challenging time – but there are ways you can make sure the process goes smoothly, and you can part ways in respectful terms.
Consider the following when dissolving a partnership:
- Partnership agreement – This should delineate the steps to take when a partner leaves, or when closing down. Not following these guidelines might result in legal action.
- Income tax return – Anyone leaving the partnership must file a final income tax return and declare profits and losses.
- Assets and shares – Members who leave may be required to split or sell their shares in any communal business asset they may have with other partners, including any intellectual property.
- Level of involvement – Partners leaving may still be involved in the business, depending on the relationship with other partners and with their consent.
Unresolved disputes can be tricky, so always be considerate, whether you’re the one leaving or supporting someone else as they move on from the business.
Getting financial advice from an expert is always a good idea. They can help you consider options you might not have thought about.
What's next
Starting a business
Growing your business
Maintaining your business
Dealing with tough times
Selling, closing, or stepping away
Company
Sole trader
Contractor
Social enterprise (doing business for good)
Other business structures