When thinking about business partnerships it’s important not to neglect the idea of partnering with another business in order to reach more people and grow, this is why a business partnership agreement between two companies can help you chase a common goal.
Every partnership is different and it takes time to learn needs and wants of your new partners. More often than not, partnering with another company with a shared vision is an exciting phase, but what if it turns sour?
This is why business partners should bank on Partnership Agreement (Two Companies).
In this article, we’ll take you through the three ways in which a Two Company Partnership Safeguard Your Business. But before we dive deep, let’s discuss how a two way partnership is different from other partnerships.
Table of Contents
What is a Partnership?
A general partnership arises when 2 or more people or companies co-operate the business and share the income. Law firms, financial companies and many small businesses frequently utilise this business structure.
Each partner acts on behalf of the other partners, and there is no real separation of the partners from the operating business. Similarly, partnerships have their advantages and disadvantages that are always important to consider depending on the type of partnership.
How is Two Company partnership Different?
A standard partnership agreement is a binding agreement that involves two or more people. However, it is possible for companies to be partners as each company has a separate legal identity. In this setting both companies will have a separate Australian Business Number (ABN) and are able to benefit from limited liability. This means that personal liability of individuals will not be an issue as unlimited liability is not applicable.
How Can Two Company Partnership Safeguard Your Business
1 Pool Resources
A Company Partnership or limited liability partnership can help you grow your own business through the pooling of resources. It can potentially minimise your costs making your business more efficient and profitable. Both companies can come together in order to achieve a common goal and achieve economies of scale. 54% of companies say partnerships drive more than 20% of total company revenue.
In a company partnership you also have more people to generate ideas to come up with innovative solutions to problems. Additionally, everyone involved will benefit from limited liability as all parties involved are companies.
2 Larger Customer Base
Customer-centric companies are 60% more profitable than companies that don’t focus on customers. So, the importance of having good relationships with your customers is paramount. 90% of CEOs believe the customer has the greatest impact on their business, so utilising this for a company partnership is incredibly valuable.
By having a company partnership, you can have access to a greater number of customers and consumers. Both companies will likely have existing marketing strategies and resources that will make getting whatever you partnership sells out there quicker and easier. Similarly, this means that there will be more people to sell to or serve. Therefore, revenue can improve and be more easily sustained.
3 Clearly Defined Roles and Responsibilities
Clearly defining roles and responsibilities can safeguard your business as it will provide limitations on what is within the scope of your partnership and potential limited partners. It is important to understand what your companies role is within the partnership is. Once you do this, you can work on getting the most out of your partnership.
For example, your company’s role within the partnership is to manufacture a specific product and your partner’s role is to distribute and market it. Knowing this can make the process of selling more efficient, so you can save time and money.
What does the Partnership Agreement (Two Companies) cover?
There are always key provisions that you should look for in a written partnership agreement to ensure each partner’s role is clearly defined and business decisions are made correctly. This includes things like maintenance, shares, capital and dispute resolution.
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Tips for partnering with a company
How to partner with a larger company as a start up?
When you are just starting out, partnering with a bigger business can help you grow quickly. Moreover, you will be able to benefit from a greater sense of stability. But getting attention from larger companies as a start up can be challenging. It is important to network to make valuable connections and get your business out there. Focus on what you want to achieve and promote it to potential partners to ensure your goals align.
What if the deal goes bad?
If you’ve spent considerable expense entering into the arrangement, you may also want to ensure you can leave with your funds still intact. It’s wise to build in a lengthy exit clause to ensure you can recoup your investment.
Alternatively, if the other party is damaging your brand and/or reputation, then the agreement can outline how you can terminate your agreement quickly. Similarly, your brand and intellectual property can be protected and set out what rights the other party has to use your brand during the agreement and/or cease use on termination.
Key Takeaways
When using a partnership business structure it is important to note that it is subject to the regulations within the Corporations Act 2001 (Cth) and the Partnership Act 1892 (NSW) as state law. But within these regulations partners are free to decide upon termination, dispute resolution and decision making.
If you would like to know more about creating a standard business partnership, Lawpath covers all your bases and also provides businesses with standard Partnership Agreement for general partners.
Lawpath has a range of business lawyers who can assist you with your partnership agreements and provide appropriate legal advice to safeguard your interests. Although a lawyer can be very useful to identify issues and mediate between company partners, you and your partners should aim to create a structure that is right for you and operates well given the context of the two different companies.Â
