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Cautions to take when entering into business partnership

For many a businessman, the fear of partnership is the beginning of wisdom. In fact, it can be safely said that “beware of bad partners” has become a golden rule for many people interested in business, as partnership has been tested and proven as capable of either making or breaking business chances.

But for the business-savvy, emotionally-intelligent and cautious businessmen and women, the partnership road not taken for some is where they ply and record their break through all the time. Why? They know their ways around; are conversant with the turns and bends and they also recognise where there are landmines—and there could be many for starters going into partnership for the first time.

Partnership, according to several online sources, has to do with the coming together of more than one person or party with a view to pursuing a business interest that is expected to be mutually beneficial and profitable for all the parties.

The United Kingdom Partnership Act of 1890 provides that partnership can come into place through conduct, oral agreement or a written contract, with the minimum membership of a partnership set at two while there is no limit as to the maximum membership. The Act further states that each partner is entitled to participate in management; get an equal share of profit, an indemnity of liabilities assumed in the course of the business and the right not to be expelled by other partners.

In England, which Nigeria apes in most of its laws, an online source maintained that “partners are jointly liable for the debts and obligations of the firm while he is a partner; where a partner has died, his estate also becomes severally liable; where there has been a wrongful act or omission or a misapplication of money or property in receipt, every partner is jointly and severally liable.”

But the most pertinent question is why partnership? Several reasons have been advanced for people going into partnership; ranging from the need to build a formidable force for business or investment to the fact that partnership affords all parties the opportunity to achieve more profits/results with little individual investments. Other reasons, including the fact that partnership is tax-transparent and could easily afford a partner to withdraw his capital, have also been cited. In a country like Nigeria, where family and communality have been valued for centuries, the idea of partnership is viewed from a positive angle as a better platform to succeed faster or achieve better results. The Yoruba ethnic group of South-western Nigeria have different sayings such as “ajeje owo kan o gb’eru d’ori,” “agbajo owo ni a fii so aya” and “bi a o ri eni ba la, ola kii ya boro,” all pointing to the imperativeness of team effort in achieving success.

 

But what are the slippery grounds that must be avoided when going into partnership?

One, nothing kills a partnership business faster than being involved with a dishonest partner or building a partnership plagued by distrust. It must be anathema to business to get involved with a partner whose personality, lifestyle and attitude one does not understand properly.

Two, having a flamboyant and financially-undisciplined partner or a Judas, a master betrayer, as partner can only bring misfortune ranging from misappropriation of resources to outright loss of one’s stake in the business. The way out of this is either to not be involved with such personality or have stringent mechanisms to check him or her.

Three, you must look out for negative traits in the individuals you want to partner with before going into the deal. These traits include but are not limited to greed, irresponsibility, indolence, overbearingness and lack of vision or foresight. Anyone with any of these traits will likely be a bad partner.

Four, you must ensure that your partner has knowledge, expertise or an idea about the business you are going into or is at least insightful about or disposed to innovations that can help the business. In the absence of these, you must ensure that you and your partners have the capacity to hire the services of appropriate persons in that regard.

Five, while the 1890 Act and many other rule books about partnership state that there is no requirement that partnership must be in writing, such position must remain only in theory! In practice, especially in Nigeria today, where money is not easy to come by due to economic recession, it is in your best interest to ensure that you do not go into partnership not backed by written agreements. In fact, there must be legally-binding agreements before you can be comfortable that you are into partnership. Indeed, you may have to jettison the African ideal of family or communality whenever partnership is to take effect, because as the saying goes, familiarity breeds contempt and this must not be allowed in a business partnership.

Six, make the partnership agreements explicit and comprehensive. You must take caution enough to take care of the present and the future. Do not enter into partnership based on faith—leave that for the religion houses. All parties in a partnership must prepare for eventualities in terms of death and other misfortunes so that the business is not doomed by such when they happen unexpectedly.

Finally, all parties must ensure full commitment to the partnership and its success; this is the only way you all can get a Return on Investment. If and when responsibilities are assigned, ensure that you committedly do your part. When there is any liability, take it in good faith and move on after a comprehensive analysis of the situation.

If you can observe some of these basics faithfully, there is a money-back guarantee that your partnership business is on the path of success.