Partnership in business is formed between two or more people where they collaborate and work towards attaining the same goal. They own and run a specific business, which enables the company to make benefits from several owner’s distinct resources, expertise, and knowledge.
A partnership is pretty much like sole-proprietorship and each of the partners owns a part of the business’s liabilities and assets. Since more than one person is associated with the decision making which eventually affects the outcomes of the business, some aspects need to be addressed upfront.
Here is where the roles and responsibilities of every member lie.
Roles of the Members
Roles are applicable for anyone who holds the responsibility of the business. Thus, other members must ensure that every individual is acting on his assigned role.
Assure that you are clearly laying every partner’s stake in the running finances and formation of the business. Mention each of the member’s contributions to the instigation of the company and how each partner will fulfill the responsibilities in the future.
It should be clearly stated that each member has to perform his role in terms of monetary contribution, time investment, equipment, effort, etc.
You are in the business to make some money and get yourself a comfortable life. The same goes for your other partners. Hence, make a business partnership agreement where all the members need to act as distributors of the profits that are generated from the business.
While making agreements, clearly describe how ownership interests would get handled in different circumstances. For instance, in the event of any of the partner’s death or maybe retirement. Make distinction of the ownership among the members so that when an unusual situation takes place, all the members can act accordingly.
This one can be said as the most important role anyone has to play while being in a business partnership. Define how everyday management and long-lasting decisions will be undertaken.
Through the formation of a decision-making scheme, everyone perceives and agrees upon the structure; as such, you can lay the foundation of your business, which can be operated without any issues.
At times, unexpected incidences take place. These are basically what makes the business so much exciting. Each of the members should have the ability to decide what has to be done when there is unavailability of a required member.
Besides, competency of evaluating a business offers based on what could be its outcome, and partnership agreement modification etc. is essential as well.
It is obvious that in a partnership business, a lot of misunderstandings and disputes will take place. Hence, each of the members must have the quality of a problem solver. But how to do that? Well, your partnership agreement should mention the resolution process, and in times of crisis, you have to take necessary steps following that particular procedure.
Responsibilities of the Members
Setting the duties upfront will save you headaches and will assist you to be able to achieve your goals at the end of the day, such as:
Each member owes an act of commitment towards the partnership and such responsibility bars generating secret profit out of business without letting others know about it. A partner does not have the right to promote a business without the approval of others and even if he does so, he should be solely liable for any damage.
The Extent of Partner’s Liability
Partners are collectively responsible for all kind of commitments made by a single partner, within the scope of the partnership business. When anyone of them is held liable for damage caused by a third person, that person may sue that particular partner or maybe all of them. And the partners are severally and jointly responsible for that issue, on all partnership contracts.
A partner must inform the partnership of all sorts of relevant matters. Revealing every ongoing act to everyone is the most feasible way of doing it.
If a member pays more money for repaying debts of the partnership, he has the right to get a portion of shares from other partners. Other members hold the responsibility to assure that one member gets his deserving share.
Liability of New Partners
A person you have just got into the partnership business has limited liability for all the obligations of the business. Other existing members have the responsibility to make it happen and assist the newly joined one to cope with the new working environment.
Partners have to observe any limitations adopted by a small group among them regarding the usual details of their partnership business. For instance, if a small group of partners happens to use a retail store and plans that they will not make any sales on credit, the partner who is in charge of the store, has to obey this limitation.
Likewise, if a third person does not have ideas about the limitation, the partner who is in charge of management will possess the power of making a binding sale on credit to that person. Thus, the third person does not happen to pay the bill.
Moreover, the partner who in the first place violated the formulated limitation is responsible for any loss caused due to his disobedience regarding that particular limitation.
It is true that developing a business partnership contract is time-consuming and takes a good amount of money yet it is worth the tranquility that persists in your business among the partners. The agreement that has been built up regarding the roles and responsibilities of partners in a partnership business assures that everyone has some sort of expectations and have an understanding as well.
After several discussions and a bit of paperwork, you will be able to make a contract that gets keep you aloof from potential legal battles and lessen your hassles soon.