9 things to know in a partnership business
A serious romantic relationship does not allow either partner to be unfaithful, neither do business partnerships. In the business frontier, simply running operations together doesn't make a partnership, unless people have legally agreed on being partners and sharing profits. Whether it's romance or business, partners need to be aware of what is okay and what isn't, what their duties are and what they can expect from the other(s).
Going forward, we'll look into the dos and don'ts in a partnership between Palash and Julie, who have a pickle-selling business named PJ Pickles. Is this really a parternership, or just a random arrangement?
The key is to understand how much they have to be responsible for. Julie needed money to go on a trip. She took some from the office cash drawer and left. The next day, an angry supplier came to the office and demanded money, which Julie was supposed to pay him. As Julie's partner, Palash had to take money out of his own pocket and pay the supplier.
This is an unfortunate reality of partnerships in Bangladesh. Partners have unlimited responsibility, meaning they'll have to personally handle and pay for any losses or dues even if it wasn't their fault.How many partners is too many?
Sometimes, handling the eccentricities of another person solo can be a chore. After the supplier left, Palash thought about how exhausting Julie's carelessness at work could be. He wanted to have more partners, because the law allows at least 2 and at most 20 partners in a business.
However, the decision to bring partners had to be unanimous. Palash realized he probably would not be able to get new partners without Julie's agreement.There is more than one form of partnership.
If Julie had been a Particular Partner, her responsibilities would be to handle only specific things in the business. Maybe then, Palash would not need her approval to get more people on board. But Julie was a Partner at Will, and the two never talked about how long she would stay on in the business.Declaring the partnership is optional.
Julie and Palash knew they could choose between registering and not registering their business. They went ahead with registration partly because both of them realised they might have major disagreements in the future, and might need legal help if things went south. Registration gave PJ Pickles legal rights as a business, making both the partners feel a little better protected.“What is yours is also mine” doesn't apply.
Julie was not the only one bad with money. In the past, Palash had used the company's office space to throw a party. He also used money from their joint business account to sponsor expensive party favours for guests.
Once Julie came back from her trip, Palash was furious with her for taking company cash. That is when Julie reminded him about his own misuse of their account. This led to hours of fighting and mudslinging.
Finally, they agreed to never use the company's account, or office space for non-business reasons, because these things did not belong to either of them personally.However, the partnership's profits are taxed as the partners' profits.
Even though they couldn't use the company's money as their own, both Palash and Julie had to give taxes from the profits they earned from the business. They realised they had to do this because their business was not taxed as a separate entity, like corporations.In running a partnership, there are some basic rules.
Fidelity, honesty, and sometimes sacrifice – these are basic requirements to sustain a healthy relationship, and a lawsuit free partnership. To maintain a good work relationship with each other, Julie and Palash legally committed to a few things.
They both agreed to work only with PJ Pickles, and not share their recipe or business secrets with any other company. They also promised to be completely honest about everything business-related with each other, so that they could prevent future fights. They also agreed to try and put the business first and their own needs later, which meant they couldn't just take pickle jars home whenever one of them felt like having some.Partners can use proxies for their presence.
After all the fighting and new decisions, Julie wondered if she wanted to take so much stress on herself. She started looking for someone else who could act as her agent, i.e. do things at PJ Pickles on her behalf. This way, Julie could still get company profits, but without the hassle of personally being there for every small thing.Decisions need to be taken together.
Before making any changes to her role in the business, Julie needed to talk to Palash first. Her decision would directly affect their business practices, so his opinion was a must.
Finally, they agreed to hire another person who could act on Julie' behalf. Palash had no objection; he was actually pretty relieved to finally have a third person to work with.
A partnership may start off as an agreement to do only a few projects, just as it had started as a decision to sell a few pickle jars for Palash and Julie. If things keep going well, it'll be smart to let the same partnership continue. If they don't, partners can always come to an understanding, and agree to change some of the rules.Source:https://www.thedailystar.net/next-step/9-things-know-partnership-business-1564768