What are the alternatives to a partnership in your online business? For some people, there seems to be something magical about creating a partnership. It’s common among the various professions in the offline world, and it probably adds a certain amount of psychological legitimacy to the business at hand. But, is it really necessary for an online business? What are the alternatives? do you need an LLC for an online business
(I should mention straightaway that a good tax accountant will be able to advise you on which structure you should use.)
But, as a non-tax professional, I can tell you that, in general, forming a partnership is not a good idea, even if you plan to divide the profits with your partner.
1. Partners share the decision-making authority equally in the business.
When you each have a 50% say in what the business will do, everything can grind to a standstill. That’s because it takes a simple majority to carry the day. If you want one thing and your partner wants something else, then there’s no deciding vote.
2. Partners share the debts as well as the profits.
When a partnership first begins, no one ever imagines that anything could go wrong. And the reasoning is that these peoplw wouldn’t form a legal entity between them if they thought that anything would.
It’s a bit like a marriage. Few people ever imagine that a separation, or worse, will ever occur. The vows “until death do us part” seem so easy to say. Later we’re reminded that we’re committed in both “sickness and in health.”
And just as in a marriage, partners can run up debts independently of the other; but the liability for paying them is shared.
3. Partners must agree on how to make the business grow.
It’s likely that each partner will bring different strengths and various weaknesses to the business relationship. And here’s the thing – and we all tend to do this: one partner will interpret the way to develop the business according to his or her strengths. So, this becomes another opportunity for conflict.
A better solution to a partnership, then, is either an informal cooperation on one project or a company in which both are employees. Then one of them can retain the 51% share of the business just in case there’s a time when they can’t agree.