What options do I have for splitting ownership of a new company?
Hi all, I'm about start my own company and I'm new to the business. All advice or material for reading and references are welcome.
I would like to share with a business partner. What types of sharing choices do I have? How should I divide the ownership of the company? What are the pros and cons?
Thank you very much.
I understand where you are at the moment. To answer your question, there are generally three types of business partnerships: General Partnership, Limited Partnership, and Limited Liability Partnerships.
The general partnership is easy to create and has a low cost of operation. For the limited partnership, this is where a partner does not partake in the day to day running of the business and the management decisions. Also, the personal assets of the limited partner cannot be used to settle business debts and their liability is limited to their investment in the business. You can call the limited partner a silent investor. But in this case, one of the partners must be an unlimited partner (general) for it to work. Thirdly, there is the limited liability partnership. This is for professionals like accountants, doctors, dentists, etc. It ensures that the assets of the partners cannot be used to satisfy business liabilities and debts.
A lot is dependent on the type of business you intend to start as that will determine the type of partnership you should go into.
Here is a link to a blog post that can make this clearer for you: https://www.bizfilings.com/toolkit/research-topics/incorporating-your-business/types-of-partnerships.
And about the advantages/disadvantages, each type of partnership has its own advantages and disadvantages. So to better answer your question, I will need to know the type of business you want to start, so we can determine the type of partnership you need. But if you want to be in full control of your business, while the other partner is more of a silent investor, then your partner should be the Limited Partner.
Starting a business is a huge decision, and when it is a partnership, it calls for careful considerations. I have written a very detailed post on the things you should consider before you finally make that decision. I equally believe it will be of great help to you.
Here is the link: http://mystartupceo.com/6-things-to-clear-before-going-into-that-business-partnership/
If you have any more specific questions, I will be glad to help.
The Business.com team recently published a guide on How to Create a Partnership Agreement that may help answer your question. Before deciding on a type of partnership, take a step back and decide what you want from the business partner. Do you only want a business partner for additional funds? Or do you want a business partner for additional funds and to be a team member and have a say in the day-to-day running of the business? Whether a general or limited partnership is best, depends on how involved the partner is.
Having a partner is dependent on the type of business you want to start. There are many types of partners, it depends on what you really need.