What is a business partnership? Business partnership agreement: sample

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The formation of such a form of business as a partnership is due to an attempt to overcome the disadvantages of single ownership. It is a contractual relationship established between several entrepreneurs for the purpose of joint ownership and management of the firm. This form of business organization allows each of them to get the desired profit through the exchange of results of activities expressed in material form. Partners combine their abilities in doing business and managing financial resources. In this way, risks are distributed, as well as profits and possible losses.

Main forms of partnership

As you participate in the activities of the firm, business partnerships can be different. Partners may play an active role in the management of the enterprise, or several participants may contribute their material resources, but do not take part in the conduct of business. Cooperation in business can pursue different goals for each of its participants, while distributing the level of responsibility. Forms of partnership follow from this:

1. Commercial. Membership based organizationthe purpose of which is to make a profit.
2. Non-commercial. In this case, the purpose of a non-profit organization is to assist its members in achieving individual goals (social, cultural, scientific, charitable, etc.).
3. Full partnership. Members are jointly and severally liable.
4. Limited partnership. Members have limited liability.
5. Strategic. At the same time, one of the partners is more economically significant, that is, more powerful in the financial sense, capable of providing the other company with resources to achieve strategic goals.

Principles of partnership in business

Relationships between people, companies and other financial market participants constantly increase the value created for stakeholders. There are a number of principles on which a business partnership is built:

1. Voluntariness.
2. Single purpose and interest.
3. Interdependence arising from the distribution of risks, income, powers.
4. Emergence (the emergence of new properties as a result of combining efforts).
5. Obligations and agreement on the share of partners.
6. Working together.
7. Sharing of resources and competencies.
8. Good communication.

Also very important for effective cooperation is the ethical side of the relationship. It lies in mutual respect and trust of partners.

Benefits of business cooperation

Thanks to their undeniableadvantages, business partnerships are in great demand as an economic mechanism. The offer to cooperate is perceived today as an effective way to increase one's own profits. Moreover, the partnership is organized by signing a written agreement, without additional bureaucratic red tape.

It allows you to redistribute various risks, and also has the following advantages:

1. Combining the resources of the participants provides new opportunities for business expansion. This not only improves the prospects for the campaign, but also makes the organization less risky for the bankers.
2. Business partnership provides motivation and interest in achieving high performance.
3. The partnership structure of the organization is more attractive to international investors.
4. High specialization in management.
5. Performing a communication exchange.
6. Ensuring the competitive advantages of participants and achieving a balance of competitive forces.

Certainly, collaboration encourages the creation of a unique business idea. Partnership is thus a support for innovative sources. The internal potential of the organization is mobilized to achieve its own economic goals.

Main disadvantages of partnership

With all the positive opportunities, business partnerships also have certain disadvantages. They are primarily related to the problem of the division of power and the incompatibility of the views of the participants. An inconsistent policy can turn into irreversible, negative results for both sides. Difficulties may also arise in the formation of a business management structure.

Another negative point is the unpredictability of the partnership. Factors such as the death of one of the members, withdrawal from the partnership, can lead to the reorganization of the company or its complete collapse.

Choosing a partner for further cooperation

The decision to involve a partner for joint activities is made for various reasons. In any case, it should provide an effective business partnership.

The offer should only be made by market participants who are able to take responsibility and have serious potential.

The partner must be fully involved in all business processes and take an active part in its development. The participants in the partnership must share the vision of the enterprise management strategy. Only in this way will it be possible to avoid disagreements and the threat of premature termination of cooperation. A prerequisite is the documentary support of the partnership.

Rules for doing business together

Only choosing the right approach and meeting certain requirements guarantees successful business cooperation. Partnership will be a great tool and way to increase income if the following points are observed:

• determination of a specific goal, objectives and desired results of cooperation;
• initial distributionpowers, duties and income;
• making a decision on the possibility of partner participation in another business;
• Monitoring of financial indicators in the process of cooperation, which is the performance test.

All partnership terms must be in writing and legally confirmed.

Partnership in Russian business

As such, the institution of partnership in Russia is quite young, although some enterprises use some of its elements in their activities. There are a number of domestic enterprises of this kind, as well as organizations with the participation of foreign partners.

For the economic prosperity of the state, it is very important to develop business and partnership. Russia cooperates with many states, while increasing investment capital.

More typical for our country is the interaction between the state and the private sector to solve socially significant problems. The so-called public-private partnership has a long history, including in Russia. However, it has reached special popularity and demand only in recent decades.

Partnership between the state and private business

Stimulates the emergence of relations between the state and business several factors. First, difficulties in socio-economic life make it much more difficult for the state to perform its important functions.

Secondly, business is always interested in new objectsinvestment. Thus, PPP is an alternative to the privatization of publicly important public property.

However, the partnership between the state and business, unlike privatization, preserves a certain economic activity of the country. Such relationships are most actively practiced in the following industries:

• Utilities;
• transport, including urban;
• education and he althcare;
• science;
• construction of public buildings;
• financial sector.

At the same time, the state is actively involved in the production, administrative and financial activities of the enterprise, thus controlling the economic processes of the country.

Sample partnership agreement

When the fact of cooperation between the parties, a partnership agreement in business is drawn up. A sample of such a document might be as follows.

Partnership Agreement

[Date]

Organization [Organization Name], hereinafter referred to as Party 1, together with [Organization Name], hereinafter referred to as Party 2, have entered into this Agreement as follows:

1) Subject of agreement.

2) Liability of the parties.

3) The procedure for settlements and financial reporting.

4) Procedure for resolving disputes and force majeure.

5) Duration of the agreement.

6) Other terms.

7) Details and signatures of the parties.

Depending on the situationthe most appropriate form of contract is selected. They also use general provisions regulating activities and confirming coordinated cooperation in this area. In some cases, the procedure for changing and terminating the contract is disclosed. At the end of the document, the details are indicated and the signatures of the parties are put.