I am looking to level up my consulting/freelance business by forming a partnership with one other partner. I have had 3 people interested in partnership but I am worried as I do not know how serious are they. It’s all nice when they are very enthusiastic but I do not know whether they can do what they claim can do. As I am looking for a partner who is better than me in Business Development skills all these 3 posses them in varied aspects. So let’s say I’m taking one of them as a partner. His stand (Let's me explain about one of the potential partner) Here’s what I know about his profile. He is around 20 years older to me and has been working in SME as a Head of Marketing. Has several contacts (which he claims; He has introduced me to some - but all of them appear to be on the same boat as us). He’s been begging me to start the partnership with him on a 50:50 basis. He has agreed to pay 50% in setup costs & take 50% revenue earned through this business. He appears to be tired of getting business for someone else & wants to run his own business. He doesn’t have in-depth understanding of my business but he claims he has the knack of fixing a meeting with these clients in favor of my business. My stand: I have been consulting 2 clients over the past two years and have been doing side projects as well. 2 Months ago I introduced the new business to my existing clients so that I could associate their name with the new company. Very recently, one of the nationwide events highlighted the business name to a large extent in the industry. I am also promised PR offline for this activity which is happening right now. I currently take care of all the management of this firm & also focus on bringing in business (This part is really slow at the moment but I have been optimistic for 3 months now - My business majorly works on a retainer model where are charge about $600 month/client.) I have already built a website for the new business & I have invested in products worth $150 each. Partnership Roles If we are to go into partnership, we have agreed that my current clients won’t be a part of the new partnership firm and will continue to be a part of my own personal clientele. However the names will be associated with the new firm His role will be to leverage his contacts & get me a meeting. Then I take over the meeting & focus on conversion. Once I handle conversion, I will be looking at delivering the business services by putting up a team & training them accordingly to the new structure I design. (None of which the other partner will be focussing on) My questions: This does’t appear to be an easy 50:50 contribution. How should I distribute the stake? We are sharing our costs equally, but should I be sharing revenues equally? How do I deal with a situation wherein business that converts comes from my contacts & none from his? Does he still get to take a share of the revenue of the firm? Is there a better way to work out a deal? Do I add him as a consultant for a test period & give him a small stake cause I do not know how well he can perform & I cannot pay him a fee?
In the eyes of the law, by the very nature of entering business with another party, you may be considered a partnership -- whether you have a written agreement or not. A partnership agreement can be solidified by an oral agreement between partners, but experts recommend putting the terms down in writing. Once you have an idea for a company, whether this means selling a product or a service, understand the consequences of opting to become a partnership. The first step you need to take in forming a business partnership is to figure out who is in the partnership. Professional firms with 50 or more partners have extremely detailed agreements spelling out rigid procedures over who gets admitted, who signs the lease, the structure of the partnership, etc. If you are teaming up with someone else to perform services for a mutual client and do not wish to make that person your formal business partner, make sure the other person signs an agreement stating clearly that they are not your partner or agent. You notify the client in writing or by e-mail that you are NOT in partnership with that person. While this exercise is not mandatory, it is extremely helpful to ensure success of a partnership. Do this by making sure a suitable Internet domain name is available for your partnership, as most businesses these days should establish a website.
You will also need to register your partnership name with a local government, for which there is usually a modest fee. And while it is not required, it is often a good idea to gain legal protection for your partnership in the form of a trademark. A business partnership does not pay taxes on income. The partnership is a pass-through entity, and the individual partners pay tax on their distributive share of partnership income passed through to them. Each year, the partnership files a return, Form 1065, to report to the IRS the income, gains, losses, deductions, and credits from the business. It also files a Schedule K-1 for each partner, allocating a share of each item of income, deductions, etc. according to the terms of the partnership agreement.
If the partnership is profitable, each partner must pay self-employment taxes on his or her net earnings. Instead, they can file a single Schedule C to report their share of business income and expenses. The most important thing to spell out in a partnership agreement is your "exit strategy" if things do not go as planned and you want to get out of the partnership.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath
Answered 3 years ago
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