January 23, 2012

Strategic Alliance: Strength in Forming Business Partnerships

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 Business partnership

Rival businesses may hate each other but these days they share a common goal: survival.


The New Year has already started off with new turmoil in the marketplace: the minimum wage may go up, which puts another financial constraint on business owners; SOPA is expected to pass the House later this month, which could effectively wipe out hundreds of web-based businesses; and the end of all fiscal years casts its long shadow on the globe. As the country strives to shake itself from the economic hangover that has plagued it since the recession ended, businesses will have to stick it out even longer. Ensuring mutual success could mean a strategic alliance.

Partnering with other businesses can be a difficult endeavor, particularly if the two businesses were previously competitors. Unfortunately, today’s economic landscape has claimed hundreds of thousands of businesses and many that remain continue to struggle.

Businesses are too often seen as having an antagonistic relationship with each other. More often than not, you will hear about companies joining forces due to an acquisition – a power play of one company over another. But in many circumstances a partnership is mutually beneficial because it offers both companies a shared pool of resources with which they can reduce individual operating costs greatly. Instead of running identical systems parallel to each other and paying for them individually, company programs like payroll processing can be unified, thereby halving the cost. Inc. Magazine has more on the advantages of partnership:

One big advantage of a general partnership is that you don’t have to register with your state and pay an often hefty fee, as you do to establish a corporation or limited liability company. And because a general partnership is normally a” pass through” tax entity (the partners, not the partnership, are taxed unless you specifically elect to be taxed like a corporation) filing income tax returns is easy. Unlike a regular corporation, there is no need to file separate tax returns for the corporate entity and its owners. But given that the business-related acts of one partner legally bind all others, it is essential that you go into business with a partner or partners you completely trust. It is also essential that you prepare a written partnership agreement establishing, among other things, each partner’s share of profits or losses, day-to-day duties and what happens if one partner dies or retires.

Of course, partnership isn’t the only way to survive tough business times. In fact, some experts are suggesting that people go act on their entrepreneurial urges and start their own companies in 2012, which is a bold indication of what’s in store for the year.

Indeed, the forecast is hazy, but with some luck and intelligent business decisions, many companies will make it through 2012 having galvanized themselves – shedding the weight of unsuccessful excess and identifying the true strengths of their business.

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Joseph Baker

Joseph is a guest writer to New Blood, Inc. He seeks to share his wealth of knowledge in small business with the New Blood blog readers.

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