Starting a business on its own is pretty hard, and starting on your own is even harder. Even though sole proprietorship has its own advantages especially when it comes to decision making and division of the profits earned, it also has it fair share of problems that makes partnership a better option to sole proprietorship.
Partnerships in business creates a lot of opportunities for the business and also creates a large source of capital for a start up. Partners in a start up spread the risk when investing in a business unlike in sole proprietorship where one individual is exposed to a lot of risks. In a partnership the partners are able to collect enough capital to start and maintain the start up.
Different resources are brought together by the partners of the start up to keep on going even when the business is undergoing tough times. The resources can be in different forms depending on the situation of the start up is facing. In sole proprietorship the business owner has the duty to promote and manage the start up alone which may be overwhelming to one individual, or the sole proprietor may not have the required abilities to bring in the required resources that will ensure the business stays afloat.
Many start ups that are in partnerships get access to financial aid from a lot financial institutions. They get loans because partnerships are viewed as safer investments by financial institutions since the partners may act as guarantors to the loan. Unlike sole proprietorship where financial institutions feel insecure to give loans and view most sole proprietorship start ups as dangerous investments because they are not sure of the returns, unless a sole proprietor puts up an asset they poses as a security to the loan they are seeking for the business.
In partnership there is a constant supply of ideas on how to expand and create efficiency in the business. This makes sure that there is always a constant supply of ideas, unlike in sole proprietorship where there is a monopoly of ideas because the business is run according to how an individual may feel without putting other stakeholders into consideration, the proprietor may be very good in one aspect but very poor in other areas of the business such as customer care or even book keeping which are very important. In partnerships all partners have chance to express and maximize their strength for the benefit of the business.
Partnership also provides an opportunity for specialization among the partners. Giving each partner a chance to work where they are good at, this creates convenience and efficiency in the start up. This reduces pressure on one person, making it easy to achieve the business goals and increase in the profit margin which assures growth and survival of the start up. Unlike sole proprietorship where all the profits go to the business owner but the risk is very high, in partnerships profit is subdivided among the partners but the risk in partnership is spread and the start up has a higher chance of surviving the first year and expanding
Written by Keith Mugambi
We Connect Entrepreneurs With Partners to Start, Fund or Grow Your Business.