Advice from an Expert - Business Consultant

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A non-profit partnership is a type of non-profit organization that is not for profit and is based on membership. The founders of a partnership can be both legal entities and individuals. A non-profit partnership can engage in entrepreneurial activities, but only on the condition that the income from it will be used for the purposes specified in the charter. Just follow these simple step-by-step tips and you will be on the right track in your business.

Brief Step-by-Step Business Guide

So, let's get down to action, setting ourselves up for a positive result.

Step - 1
In order to formalize a non-profit partnership, you and the founders must decide to create it. The number of founders of a non-profit partnership is not limited by law, but there must be at least two. You must make the decision to create a partnership at a meeting of the founders. There, consider the issue of developing a charter and concluding a memorandum of association. The conclusion of an agreement is not a mandatory procedure. It can only be drawn up at the request of the founders. Having done this, move on to the next steps.

Step - 2
Remember that the charter of a non-profit partnership must contain information about the procedure for managing the activities of the partnership, the composition and competence of management bodies, and the procedure for distributing property remaining after the liquidation of the organization. In addition, the charter must contain information about the branches and representative offices of the non-profit partnership, the procedure for forming property, the conditions and procedure for joining the organization, etc. Having done this, move on to the next steps.

As a partnership, it is driven by an attempt to overcome the disadvantages of single ownership. It represents a contractual relationship established between several entrepreneurs for the purpose of joint ownership and management of the company. This form of business organization allows each of them to obtain the desired profit through the exchange of results of activity expressed in material form. Partners combine their abilities in conducting 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 company's activities, business partnerships may vary. Partners can play an active role in the management of the enterprise, or several participants can invest their material resources, but do not take part in the conduct of business. Collaboration in business can pursue different goals for each of its participants, while distributing the level of responsibility. This leads to the following forms of partnership:

1. Commercial. A membership-based organization whose purpose is to make a profit.
2. Non-profit. In this case, the goal of a non-profit organization is to assist its members in achieving individual goals (social, cultural, scientific, charitable, etc.).
3. Full partnership. Members bear joint and several liability.
4. Limited partnership. Participants have limited liability.
5. Strategic. Moreover, one of the partners is more economically significant, that is, more powerful in a 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 continually increase the value created for stakeholders. There are a number of principles on which a business partnership is built:

1. Voluntariness.
2. Common goal and interest.
3. Interdependence arising from the distribution of risks, income, and powers.
4. Emergence (the appearance of new properties as a result of combining efforts).
5. Obligations and agreement on the share of partners.
6. Collaboration.
7. Sharing resources and competencies.
8. Good communications.

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

Benefits of business cooperation

Due to its undeniable advantages, business partnerships are in great demand as an economic mechanism. An 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 makes it possible to redistribute various risks, and also has the following advantages:

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

Of course, collaboration encourages the creation of a unique business idea. Partnerships are 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 uncoordinated policy can result in irrevocable, negative results for both sides. Difficulties may also arise when forming a business management structure.

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

Choosing a partner for further cooperation

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

An offer should only be made to market participants who are capable of taking responsibility and have serious potential.

The partner must be fully involved in all business processes and take an active part in its development. Partnership participants 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 conducting a joint business

Only choosing the right approach and compliance with certain requirements guarantee successful business cooperation. Partnership will be an excellent tool and way to increase income if the following points are met:

• defining specific goals, objectives and desired results of cooperation;
• initial distribution of powers, responsibilities and income;
• making a decision on the possibility of a partner participating in another business;
• indicators in the process of cooperation, which is a test of effectiveness.

All terms of the partnership must be written 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 partnerships. Russia cooperates with many states, while increasing investment capital.

More characteristic of 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 particular popularity and demand only in recent decades.

Partnership between government and private business

Several factors stimulate the emergence of relations between the state and business. Firstly, difficulties in socio-economic life significantly complicate the state’s performance of its significant functions.

Secondly, businesses are always interested in new investment objects. Thus, PPP acts as an alternative to the privatization of socially important state property.

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

• transport, including urban transport;
• education and health;
• scientific field;
• construction of public buildings;
• financial sector.

At the same time, the state actively participates in the implementation of 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 occurs between the parties, a business partnership agreement is drawn up. A sample of such a document could be as follows.

Partnership Agreement

[Date]

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

1) Subject of the agreement.

2) Responsibility of the parties.

3) The procedure for calculations and financial reporting.

4) The procedure for resolving disputes and force majeure circumstances.

5) Duration of the agreement.

6) Other conditions.

7) Details and signatures of the parties.

Depending on the specific situation, the most appropriate form of agreement is selected. They also use general provisions regulating activities and confirming agreed cooperation in this area. In some cases, the procedure for changing is disclosed and the details are indicated at the end of the document and the signatures of the parties are affixed.

With partners? This question is perhaps the most important and, at the same time, the simplest. The most important for the simple reason that its future fate largely depends on the form of organization of the partner small business. Well, it’s simple because there isn’t much choice. But, nevertheless, many novice business partners make a mistake in the form of organizing their business.

Introduction.

The future will certainly have a question: in what form should I register my business? This question is important and the fate of the created business depends on the correctness of its solution.

Let me remind you that there are several forms of registration and business organization. These are: IP - individual entrepreneurship, LTD or LLC - limited liability company. We will not consider other forms of business organization, because They usually have nothing to do with small businesses. So, what is better for an individual entrepreneur or an LLC. Within the framework of this article, I will not analyze all the advantages and disadvantages of forms of business organization. I will consider them only from the point of view of organizing a partnership business.

First of all, let's consider organizing a partnership business in the form of an individual entrepreneur. There are two partnership options in this case.

First option– registration of all IP documentation for one of the partners, and the other partner (or partners) are unofficial co-owners of this.

I want to say right away that I am not a supporter of such partnerships. Moreover, I consider this path unacceptable for real business. Although many young entrepreneurs are trying to follow this path. The perceived benefits of ease of registration, ease of reporting and the possibility of small tax cuts are very attractive to them. The disadvantages of this option are not immediately visible, but they are so significant that they many times outweigh all the visible benefits.

And the main drawback is the completely unjustified risks of the partners. Moreover, there are risks for everyone.

First of all, the partner for whom the individual entrepreneur is registered is at risk. It is he who will be responsible to government agencies if something goes wrong in business. It is he who will be the debtor of the tax authorities, suppliers, and creditors in the event of a business loss. Moreover, his liability is not limited to the property of the business, but also to his personal property. His personal car, personal property, and even an apartment may be confiscated to pay debts. Well, unregistered co-owners do not bear any responsibility to anyone, perhaps only to their own conscience.

But the unregistered partner(s) are also at risk. After all, only an officially registered partner has all rights to the business. And if partners quarrel or want to split the business, problems are inevitable. After all, the only legal owner of the business, and, naturally, the owner of everything that is in the business, is the first partner. And the second one has no rights and will not be able to prove his participation in the business.

Can an unregistered partner protect himself? Formally, it is possible to secure money invested in a business. It is necessary to draw up a loan agreement, according to which he lends money to the official owner of the individual entrepreneur. And in the event of a disagreement between partners, this agreement can help him return the amount invested in the common business. But he will not be able to return his part of what the business earns (if it is successful).

As you can see, the risks of all partners are quite high, and I strongly do not recommend using this method of partnership if you create a small business with partners.

Small business with partners in the form of individual entrepreneurs.

Second option– each of the partners formalizes their own individual entrepreneur and then they enter into a simple partnership agreement among themselves. This option significantly reduces the risks of partners and is quite widely used in practice. Its essence boils down to the fact that each of the partners registers their own individual entrepreneur. And then they create a single business by signing an agreement on joint activities. In this agreement, persons specify the rights and obligations of each partner. Details about the partnership agreement can be found in. This option is in many ways similar to the creation of an LLC by two or more partners, without opening a legal entity.

The advantages of this option seem obvious: each of the partners has an independent business; income and expenses are divided depending on the contribution of the parties; in the event of a division of the common business, everyone can remain an individual entrepreneur with their own share of the common business.

But there are also plenty of disadvantages in this option. After all, each partner must have its own reporting. And, in addition, it is necessary to maintain general reporting of the entire business. And in the case of, for example, the implementation of one project, all income and expenses for its implementation should, in proportion to the participation of each, be divided between the partners. This is quite difficult to do with different shares of partners. A significant drawback is that each of the partners can very easily leave such a business. Just leave with your share and the equipment registered to his individual entrepreneur. And this could lead to the closure of the entire business.

These shortcomings are so significant that I believe that such a small business with partners is not entirely justified.

Partnership business in the form of LLC.

I consider the most acceptable option to create a small business with partners to form an LLC. In many cases, this may be the only correct option. The very organizational essence of the LLC provides for the elimination of many problems for partners.

Firstly, registering an LLC allows you to specify in the constituent documents the main parameters of the relationship between the co-owners: the share of each partner in the common business, the distribution of profits between them.

Secondly, the organization of an LLC provides legal protection of the rights of each co-owner.

Third, partners in an LLC are proportionately responsible for everything that happens in their business. But, with rare exceptions, they are not liable for their personal property.

Fourthly, all LLC activities, including financial ones, are completely transparent to all partners, and each of them can monitor the state of the business at any time.

Fifth, none of the partners can simply leave the LLC. There are legitimate legal procedures for this. This gives time to the partners remaining in the business to make informed decisions to continue the business and, if necessary, to “patch holes” in the business.

Sixth, it is much easier for an LLC to enter into partnership agreements with other companies, especially large ones, than with a business organized through a simple partnership agreement.

Seventh, the LLC must pass all cash flows through a bank account. This disciplines the financial activities of partners and its transparency. Disciplines the activities of partners and the need to print on most LLC documents.

Eighth, running an LLC may be more economically profitable than using a business created through a simple partnership agreement for partnership. Especially if there are more than two partners. After all, every individual entrepreneur must have an accountant, but in an LLC there will be only one. Other organizational duplications will also be eliminated.

The only disadvantages of running a small business with partners through an LLC are the more complex and costly registration and closure of the business.

Many people believe that running an LLC is more expensive. But even in an LLC, with proper management of financial activities, you can significantly save on taxes, and on maintaining bank accounts, and on other expenses.

Conclusion.

As is easy to see from the above, a small business with partners, in my opinion, is best organized by creating an LLC. But we must not forget that simply organizing an LLC will not solve all the issues that arise when doing business together. Only a well-drafted agreement between partners, in addition to registration documents, will avoid many problems in the future.

IP means “individual entrepreneur”. According to the legislation of the Russian Federation, an individual entrepreneur is an individual registered in the manner prescribed by law and carrying out entrepreneurial activities without forming a legal entity.

Entrepreneurial activity is considered to be an activity aimed at systematically generating profit. Thus, based on the meaning of the definition, we can say that IP cannot be opened for two.

An individual entrepreneur is an individual, that is, one person, and not a legal entity, not a team. What should two people who want to do business together do?

In Russia, there is an idea that registering and operating as an individual entrepreneur is easier and more profitable than creating a legal entity. However, this is not entirely true. We will assume that “registering an individual entrepreneur for two” means joint business. In this case, there are several options for its design. Let's consider them sequentially.

Option 1. Register one of the participants as an individual entrepreneur

In this case, only one individual will undergo state registration as an individual entrepreneur. In this case, the second person can unofficially invest money and participate in business management.

Many entrepreneurs do this, believing that in this case they will be able to save significantly on taxes, accounting, using cash register equipment, having a bank account, etc. Whether such savings will really be profitable depends on many indicators - the activity of entrepreneurial activity, its types and other aspects.

The more important issues, from the point of view of two people participating in a business, are not small savings and ease of registration, but guarantees of safety and financial responsibility of the participants. In the case of registration of one individual entrepreneur, the participant who is officially registered has all the rights to the business and in the event of a quarrel or the need for division, problems may arise. According to the law, the second participant does not have any rights to a share in the business and it will not be possible to prove his participation in it.

As practice shows, this way of doing business is chosen by relatives or close friends who trust each other and are not afraid that one of them will deceive their partner. However, anything can happen in life, even close relatives quarrel.

How to protect yourself in this case? The only option may be a loan agreement between partners, as individuals. That is, the contribution of an unregistered participant is confirmed documented as a loan to a registered participant.

Receipts must be kept. This will help you get your money back if the relationship goes bad. But even such loan agreements and receipts will not be able to fully compensate for the costs of organizing business activities incurred by an unregistered participant. It should also be remembered that a business participant registered as an individual entrepreneur also bears certain risks that will not affect an unregistered participant.

For example, if the business turns out to be unprofitable, the individual entrepreneur will pay debts within ALL your property, which will take into account real estate, car, etc. Such risks will not affect those who participated in the business unofficially. Thus, the described method of doing business for two can be risky and unprofitable for both parties, both the registered participant and the unofficial one.

Option 2. Both participants are registered as individual entrepreneurs and enter into a simple partnership agreement between themselves

This option is described in detail in the Civil Code of the Russian Federation (Article 1041). A simple partnership agreement is also called an agreement on joint activities and involves the association of two or more persons to conduct joint entrepreneurial or other activities without forming a legal entity.

A prerequisite is that both parties are individual entrepreneurs or commercial organizations. If a partnership is formed, both individual entrepreneurs determine the amount of contribution to the common cause, including property, business reputation, professional skills and knowledge, etc. The material assessment of the contribution of each participant is determined by agreement of the parties.

What are the benefits of such a combination:

• Both individual entrepreneurs are full participants in the joint business
• In case of termination of joint activities, each individual entrepreneur can act independently
• Profits from common affairs are distributed in proportion to the contribution

However, there is also cons. Each individual entrepreneur will be required to keep separate records for independent activities and activities within the partnership. Reporting is also carried out in two areas of activity. Without going into the details of accounting and taxation, we note that such business management can create certain difficulties, especially for inexperienced entrepreneurs who are not yet familiar with all the intricacies of tax reporting.

Option 3. Formation of LLC

In many cases, registering an LLC will be the best option for running a joint business.

Firstly, only LLCs have the right to carry out certain types of activities (for example, selling alcohol).

Secondly, registering an LLC allows you to register in the constituent documents the share of each founder in the authorized capital and the distribution of profits between them, which means it will protect each participant from a legal point of view.

Thirdly, LLC participants bear responsibility on the company's obligations only within the limits of the share in the authorized capital. The procedure for registering an LLC is somewhat more complicated than registering an individual entrepreneur and includes the mandatory preparation of constituent documents and a decision on the creation of an LLC; it is also necessary to open a current account and make a seal. However, for participants in a joint business, such an organizational and legal form is still more attractive and safer.

Opening an LLC will not be much more expensive than registering an individual entrepreneur. And in an LLC you can save on taxes, on a bank account, and at the same time get a safer and more reputable organization.

Doing business as an individual entrepreneur is profitable only if the entrepreneur is truly “individual”, that is, he conducts his business independently at his own peril and risk.

As a conclusion

If you intend to run a business together, then you must initially properly formalize it and register it in the manner prescribed by law. This may require slightly more physical investment, but it will protect each participant in the event of an unforeseen situation, for example, a quarrel, a crisis, or a desire to close the business.

Business options described above each is good in its own way. A detailed description of the pros and cons of an individual partnership or LLC is not the topic of this article, but this information is also worth studying before deciding to organize your own business. In the case of an honest and fair initial organization of the business, it will be easier and calmer for each participant to work.