Business partnerships are exciting! You’re cooperating with another company that shares your visions, values, and goals, and you are working together to build the company into something big. However, before you sign off an agreement, there are some things you need to know to create an orderly relationship:

What Are Business Partnerships?

A business partnership is a legal relationship between two or more parties that jointly manage and operate a company. Some partnerships include both parties working in equal parts of the business, while others may have partners who only have limited participation.

Various Types of Business Partnerships

General Partnership

Both parties in a general partnership participate in the day-to-day operations of the company and share liability as owners for debts and lawsuits. Everyone involved in the general partnership is responsible for the business and actively manages and exercises control over the company.

Limited Partnership

In a limited partnership (LP), the liability and responsibility of the business are divided with one party holding more control. The general partner oversees and runs the business and has unlimited liability for the debt, while the limited partner does not partake in day-to-day operations but has limited liability.

Limited Liability Partnership

A limited liability partnership (LLP) extends limited personal liability to all partners: each partner’s liabilities are limited to the amount they invest into the business, and an LLP protects partners from liability from the actions of other partners.

How to Ensure a Successful Partnership

Know your goals and worth. For a business partnership to be successful, both parties must clarify every aspect of the relationship before and after the contract. It might be an uncomfortable conversation, but you cannot just assume your partner’s stance and potential position without talking it out.

Know your own goals when setting up a contract: why do you want a partnership? What qualities does the partner offer that you can’t achieve on your own? What role do you have in this partnership, and what responsibilities will both of you have? Keep in mind your worth when negotiating and stay reasonable to make the most of the partnership.

Examples of Successful Partnerships

Uber & Spotify

In late 2014, Uber and Spotify announced a partnership to allow Uber users to connect to their Spotify accounts and listen to their tunes in the car. Once you’re in the Uber vehicle, you can wirelessly control the music from your Uber or Spotify app throughout your ride. It was a great marketing move for both parties and drastically boosted customer loyalty. Not only did it create a more personal connection for Uber riders, but it also gave both companies a new competitive advantage over other industry players. It drastically boosted customer loyalty.

UNICEF & Target

Since 2015, Target has been a Presenting Sponsor of UNICEF Kid Power and donated $6.5 million to help the program expand. Through this partnership, Target aims to build upon the expansive nature of its business and value chain and facilitate the world’s progress aligned with the Sustainable Development Goals. h

Keep in mind, this article is not providing financial or legal advice. Please consult an attorney or an accountant for more details or if you are interested in pursuing a business partnership.

Edited by Sophia Shiu