In the UK, a business partnership is a business structure that allows two or more individuals (or entities) to run a business together. Partnerships mean that the partners share all the risks, profits, losses, and business responsibilities in accordance with what is outlined by their business partnership agreement.

A business partnership agreement is a business contract between partners, and they define and set out the terms and conditions of how the partnership will work. A partnership agreement is one of the easiest ways to ensure that your business partnership is a success.

In this article, we’ll look at the steps you can take to create an effective business partnership to ensure your success in your business endeavours. Take a look below now for more information.

Understanding Business Partnerships

Under UK law, there are a number of different types of business partnerships that you may enter into. These include the following.

• General partnerships: These are the most straightforward kind of partnership in the UK. A general partnership constitutes a formal agreement between two or more people who intend to carry out business together. This kind of partnership does not require the formation of a business entity, which means that the partnership is not a separate legal entity from its owners.
• Limited partnership: Commonly abbreviated to LPs, limited partnerships are legal business entities that consist of two kinds of partners: general partners who have unlimited liability and special partners with limited liability.
• Limited liability partnerships: Usually abbreviated to LLP, limited liability partnerships operate as general partnerships but are formal legal entities. The partnership is its own legal entity, which means its assets and liabilities are its own. As with limited partnerships, LLPs have general partners and limited partners.
• Public-private partnerships: PPPs are partnerships between government and private sector entities used to deliver services.

There are other, newer kinds of partnerships, too, like LLLPs, which constitute a hybrid form of partnership. Choosing the right kind of partnership is entirely down to you, your business goals, and how much of a role you want to play in the business. It is always best to speak with a business professional who can advise you on the best kind of partnership for your specific case.

How to Create an Effective Partnership: The Key Components

The first component of any successful partnership is working with the right person. You should work with someone who complements you with their skills, values, and expertise. You should ensure that your communication style and business approaches align and that you can trust them fully.

Once you have the right partners, there are other vital components that you will need for an effective business partnership.

#1 Create a Comprehensive Partnership Agreement

While a business partnership agreement is actually not required under UK law, a formal agreement can ensure that your partnership is a success. If you don’t have a formal partnership agreement, then your business is legally governed by the Partnership Act 1890, which is a rather old and outdated piece of legislation that has been known to cause a few problems for partnerships in the modern day.

Key terms that you should aim to include in your partnership agreement include the following.

• The commencement date of the partnership and the length of the partnership
• The roles of all parties
• The percentage of ownership
• The division of profit and loss
• How disputes will be resolved
• Withdrawal from the partnership or death of a partner

#2 Define the Roles and Responsibilities

While you should set out roles and responsibilities in your partnership agreement, it is also a good idea to make these clear in a more substantive way through consistent communication. Make sure to define these with each new project and ensure that each partner fully understands their role and how it will help you achieve the business objectives of the partnership.

It is always best to delegate roles based on each partner’s areas of expertise. For example, if one partner has a background in accounting, they may be the best person for the role of financial coordinator.

#3 Communicate Effectively

Communication is critical to a good partnership. We recommended above that you should choose a partner or partners who you know have similar or complementary communication styles. Fostering an environment where partners feel that they can share ideas or concerns in a safe and secure way is of the utmost importance for a successful partnership.

At the beginning of the partnership, make sure to set out clear communication channels and get at least one monthly meeting in the diary where you can discuss any issues, track your progress, and make decisions that need to be made in person.

#4 Evaluate and Adapt

Lastly, as a business partner, you need to be able to adapt to shifts in the market, economic challenges, and even changes in the partnership. One of the best ways to stay ahead of the curve in this way is to consistently evaluate your success as a business and work through challenges together.

You can measure your success in many ways, but it’s about the communication and evaluation of what is working and what isn’t. Schedule quarterly reviews to ensure that everything is working as it should and always be flexible to change.

Final Thoughts

Creating an effective business partnership will require a partner you can trust, a comprehensive formal partnership agreement, and clear and precise communication. If you’ve got these key components, your business partnership should be able to combat change and continue as a success for years to come.