Big Business Decision: To Incorporate with Business Partner or Go In Alone?

Discussion in 'Growing and Managing a Business' started by Puppy, Mar 1, 2012.

  1. Puppy

    Puppy
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    Hi there,
    I am new to this forum. I was trawling on the internet looking for some information to help inform an important business decision I am going to need to make soon and I stumbled across Business Advice Forum.

    I am having some long discussions with my business partner (she lives in another city about 10 hours drive from me) at the moment and would be very keen to get some perspectives on things. We are business consultants. It has come to a bit of a crunch point where we need to decide to go all in by incorporating ourselves as one company and profit sharing, or alternatively disbanding our name (our current business name is our last names combined) and both setting up different brands. We are currently both sole traders operating under a partnership agreement. So we both currently run our own businesses (although neither of us has incorporated) and use the partnership as a zero profit administration entity i.e., we split the costs of marketing, our website and professional licenses that we require for our business.

    The reason we are looking at doing either an all in effort or disbanding is that we have grown away from each other. We operate in different markets and our mode of deliver is different (I provide a more bulk service where the business partner does less but provides more intensive services. We could carry on doing what we are doing but feel that our businesses will just separate more making things more complicated down the track i.e., shared resources may become even more difficult to divide, etc if we decided to split the partnership down the track. By incorporating as one we feel it would allow us to capitalise on the brand (our last names combined) we have created, it would encourage us to work more closely together and provide support / shared effort away from the alternative of setting up a new brand alone and feeling like a one person band.

    Obviously though incorporating as one entity presents it own challenges. My income from my sole tradership is about double my business partners. So if we both put in and share the profits then I would be taking a hit in the pocket in the first years although I would be comfortable doing this if it meant we built a larger and more profitable business down the track. The business partner has got some regular clients and is slowly building things up but she does not get the same numbers through as me due to operating predominantly in the private sector. I also think she may be giving a little too much client service and talking too much instead of ringing the till, but for her this is really important to the way she operates, and she probably has issues with my less intensive approach. Another contributing factor is that she had her third child last year so has not been as available to clients. But that said she has a great work ethic and is exceptional when it comes to the detail and processes. These are areas of weakness for me. I am much more the starter of new products and she is the finisher. When we first set up about three years ago we collaborated a lot and it's probably fair to say neither of us could have set things up like we did without each other’s input. But now it's at a point where we don't really need each other as much.
    Sorry this post is so long, but I would love to hear any perspectives as we continue to gather information to support our next steps? I have bullet pointed the pros and cons for me for both scenarios.

    Going in together (Sharing Profits)
    Pros- Support from one another, shares the effort, maintains our brand, we feel bigger in the market, someone else available to cover when one of us is away or when there is a work overflow

    Cons- I lose some ability to do what I want to do, the business partner likes to control things where I am not good at being told what to do, I am keen to grow the business where she is less keen, my profits will decrease in the first couple of years, we will potentially butt heads with one another over different approaches

    Going in alone (Disbanding our name and setting up separate brands)

    Pros- More versatility and scope to drive the business in the direction I would like to take it, profits in the next couple of years higher for me, less butting of heads, still be able to maintain the relationship and work as associates on some projects.

    Cons- Feels like a one man band, less support, expenditure (time and money) to rebrand and set up marketing material and some systems, loss of brand, possible perception in the market that we have split and ended on bad terms.

    So what do you think, all in or all out?

    Any advice or thoughts would be greatly appreciated.

    Many thanks
     
  2. JPM

    JPM
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    I've moved this to the general business advice area, hopefully you should get some replies pretty quickly there.

    Welcome to the forum BTW.
     

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