Partnership or Business Associate: Which One Should You Choose?

By Karlene Sinclair-Robinson

It is often noted that many startups use the term “Partnership” when describing their business associates or other connections. This can be true, if they have a legal connection. If not, the connection should be clearly stated. When the term is misused, it can put the business owner or their associates in a bad position. For instance, publicly claiming that you are business partners can cause problems later on, if there is legal action taken by a third party.

Partnership Option

Deciding to form a partnership is something that all parties involved must seriously consider. If this is the best option for the individuals involved, seek legal advice before signing on. The most important part of this transaction is the signed agreement documenting the partnership. If this is not done, there is no partnership.

The parties must be of one accord knowing what direction they want the business to take. Their ownership rights, roles and duties must be clearly stated, documented and approved by all involved. Ownership value and profit-sharing must be clearly stated and documented. All parties must follow through in the creation or completion of stated roles and duties to make this a viable and successful partnership.

Remember, this is like a marriage. It cannot be one-sided, it must be balanced. If one or more of those involved do not participate to the fullest extent to make the business a success, it will fail. The partnership will fall apart. Friendships will be lost, marriages can be affected, the business can close, and much more. So, before you choose this option for your business, make sure this is the best solution.

Business Associate Option

This option can come with fewer problems. It can also come with fewer accomplishments. When business owners decide to work together as associates’ verses partners, it can be more beneficial to some than to others. It all boils down to how strong the connection is and why you want to work together. If the “WHY” is not strong enough and the benefits are not clearly stated, this will certainly not work.

On the other hand, if the “WHY” is great enough, this could be one of the best solutions to startup business owners working together. Working together and helping each other can bring about a great success level for startups than before. Knowing that you have others you can call on is important. Being able to help others succeed will make a huge difference.

Finally, whatever avenue you chose, doing your best to make it work will be beneficial to all. Make sure to seek legal advice before signing any partnership agreement. While one option might be more beneficial than the other based on your business needs, it is never a good thing to go into these situations with your eyes closed.