Beginning of a Partnership Business
Starting of a business
We all understand that starting a business needs lot of careful planning and the one who is in planning process must check various steps of while taking financial decisions and that's not the end but one has to look into a number of legal and statuary activities while finalizing the plans. I am writing this post assuming that everything else regarding the business has been already finalized. There are certain steps which need a very careful planning since all your future plans will depend and revolve around these points.
There is no need to emphasis on a simple but most important point while in the process of starting a business is that there should be a foolproof Business Plan with enough flexibility which could be changed according to demand of the business requirements from time to time. You may want to make changes as the things shape but a written plan will help you chalk out how you will start and run your business successfully. Please keep in mind that obtaining the business licenses and completing other formalities is one of the most important and cumbersome job while starting business in India and slightest of lack of knowledge can ruin the entire business plans so it’s better to get a list of all governmental licenses and permits required for your business needed in your particular state
The initial processes
I am very much sure you have chosen the location for your business carefully where you can get all finished and raw material easily and without spending too much for their transportation. It’s better to take help of experts on how to select a customer-friendly as well a location where you can get trained laborer and the most important customer for your selected business. The expert business strategies from your selected field will give you a wide vision and training along with counseling services for preparing a perfect business plan and also how to arrange other necessary permits for your prospective business including finding government loans, venture capital and grants/subsidies to help you get started. I suggest you to take the services of an expert CA of that particular area who has the knowledge of project management in that particular field.
The types of business and registrations
I am sure you have already decided about the form of business whether a whole ownership or sole proprietorship, the partnership, a private limited company or a limited liability company or is it going to be a corporation, a public limited company. Once you have decided that you need to apply for the registration of your company’s name accordingly with concerned authorities accordingly. Once that part is over the registration process with various other agencies has to be completed carefully which includes industries/tax departments (state and central), electricity, pollution, excise (if the need be), labor etc but in some cases the list may include up to 50 departments in case you are about to set up a manufacturing unit. By the way there are a number of programs available which might assist you in startups, small scale industries.
Are you entering into a partnership business?
If your answer is in affirmative then let me say it’s a complicated matter since we expect a lot from our partners and in most cases we succeed or fail depending upon partners’ activities. But one must keep in mind right at the starting point of the business to the extent to have an alternate plan in case the partnership does not carry on successfully as the two minds are never the same but there might be difference of opinions in many fields of the business. Why I say to keep a ‘plan B’ ready for the partnership business as the entire business will be finished if the partnership venture breaks in the midway.
Let’s begin from the beginning. There are thousands of well qualified people coming from I.I.T, I.I.M and other reputed engineering and business schools who are not satisfied with their salary after putting up a lot of labor and efforts in their jobs and planning for their own business. There are thousands of examples of successful ventures lately where people have invested very little and made lot of money within a short span of time. Let me give you few example, take Flipcart, Snapdeal etc both of these companies were started by two college mates who even worked in the same companies or almost same type of business before starting their own business and soon became the leaders of the trade. And these two companies are not the only examples but a long list follows.
Whatever the reasons but the trend to start own business is picking up at a rapid rate and if we have to believe the trends most of such businessmen work for 5-7 years in a job and then think in terms of starting their own business. To be more precise at the age group people tend to do something by the time they reach to the age of 30-35. There is another point to be noted that most of these business are coming up in partnerships so if you too are one of them who is planning a business in partnership look at the following points before getting into the partnership venture.
The First question is for you
Before entering into a business and thinking in terms of partnership ask yourself a serious question, ‘do you really need a partner?’ and if your answer is still yes then the next question is what will be the role of your partner in your prospective business venture! Will he be assisting you in running the business or will he be your financial partner? Will he be a legal partner or an overall partner on 50-50 basis? Whatever the conditions in your partnership but let me make it clear that if you are planning for a partnership firm everything, every rule must be in black and white as mutual agreement might not work for a long and successful venture. Both (or more) partners must know each point clearly and must make any constitutional changes only after reaching to a mutual decision with proper changes in partnership deed.
People might have different personal experiences of partnership but the fact is that despite most business partners are either related to each other or close friends or coming from the same colleges, industries and known to each other well but if you have not completed proper legal formalities the chances are you will regret your act at a later stage. It is wiser to have every condition regarding responsibilities and in case of going out of the contract everything must be written clearly in the partnership deed with the help of an expert in such matters. The best person for such an agreement is a lawyer on industrial matter and the agreement should be registered in a proper registrar’s office.
The partnership deed is a document which is carefully prepared having each detail of every partner having share value, profit percentage, responsibilities while into the partnership or in case he goes out of the partnership. By the way, the partnership deed is written again in case a particular partner goes out of the partnership and another one enters in. The partnership deed becomes all the more important if the loans are involved in the business.
Paperwork at every point
What I feel is that relations and business are two different propositions and should not be mixed unless the whole chemistry matches to the point of perfection. One will agree with me that if you started a business with one of your close friends or relatives and it did not lat the relations will also go sour. So, the important point is that you should keep your sentiments aside and chose your partner according to your needs and for that you need to do a lot of paperwork in advance.
Shortlist the people you deem fit to enter into a partnership and list their qualifications (and also the disqualifications). You will see that most of your shortlisted parsons have lots of qualifications but if you give another look to the list you will also notice that some of the shortlisted people are not coming good to your expectations. In some cases you might even get confused as his profile matches almost all your requirements but only a small point makes you hesitant. At this point the test is of your abilities and choice of selection.
Have you heard about Calligraphy?
I did not know much about the art of calligraphy but there was a discussion in an online forum where a particular member was writing repeatedly about calligraphy which made me anxious to know about it. I searched about it and found out that, ‘line or a group of lines either derived from or resembling letter forms and characterized by qualities usually associated with cursive writing, especially that produced with a brush or pen’. In fact, it was all about the art of producing decorative handwriting or lettering with a pen or brush. How one writes reflects his inner personality. Interesting, it made me go deeper into the subject and I found certain interesting facts about the art which said a person who does not use his surname in his signature is considered a careless person. There was another interesting point that people consult calligraphy experts before employing someone or making him a business partner. I suggest you to try this one out as I trust in writing as a perfect reflection of a person.
Harmful in Business Partnership
A- There are certain points which could become the points of destruction in a flourishing business like a company earning good profits but a certain partner is not getting equal share despite his best efforts since the business agreement has conditions to that effect can kill the interest of that particular partner. In such a case either that partner slows down his activities or the danger of breaking the partnership looms large in such a case.
B- This one is a common situation once the partners understand the business from inside out their priorities begin to change. Some of them feel they can run such a business on their own
C- The worst that can happen to a partnership the lack of understanding between the partners which creates doubts in between the partners. Once the feelings of doubts are there, no business can flourish in normal course. In some cases the partners develop a sense of lack of interest and the end result is always a broken partnership.
D- In case of affirm going bankrupt the rules say that all the partners are liable for compensating the losses or if one of the partners break the rules and becomes the reason of losses to the firm the other partner/s can held him responsible in such a condition and claim for settlement but that is possible only if it is mentioned in the partnership deed or a partnership deed exists at all.
E- Lack of communication is one major reason for breaking relations and this is truer in case of companies which might suffer heavy losses if there is lack of proper communication in between the partners. It’s a universal fact that no company survives which is running in losses.
Tips for running a company successfully
When a person becomes owner or a partner of a company that is entirely different from working as an employee however high the post he was working at. A manager has limited responsibilities compared to that of an owner or partner of a company. Manager has to lead a team but an owner or partner has to lead all the departments at the same time and also the responsibility of enhancing the knowledge of their employees. It’s better to convey your ideas to the staff in no uncertain matter so your workers know your expectations.
I don’t think there is a need to tell you that what you expect from others should show in your own behavior with a clear message that the company is open to all good ideas irrespective of the source it’s coming from. I know as a former worker yourself you know the importance of encouragement which in my views is one of the best tools to take your company to next level. There is another important point which a successful entrepreneur knows well, you cannot change your mood everyday but stick to your decision once you have taken it unless of course there is need to do that.
Finally, you may be the owner of the company but let others express their views as you never know where you get your million dollar idea without paying a cent for that. I don’t think it will take time for you to understand and learn the qualities of becoming a good entrepreneur since you have come up to this level but you need to keep a constant eye on your workers and network. Best of Luck.
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