Many businesses come together to accomplish a business venture that neither one of them could pull off separately. Though joining forces with another company presents opportunities, the question you should resolve is what kind of entrepreneurial relationship presents the better option for your business.
Different options can allow your enterprise to operate with another business. To take two common examples, you could create a partnership company, or pursue an alliance.
How alliances and partnership companies work
An alliance arises when businesses agree to collaborate while maintaining their independent status. You contribute specific assets and finances per the alliance terms, but those resources do not belong to the alliance itself.
By contrast, you may desire to create a closer arrangement with another business to share profits or losses proportionately. To do so, you may create a partnership company with the other business. This is an enterprise that the companies involved jointly own and operate.
Liabilities and contributions
Within an alliance, you remain liable only for the operations of your own company and not for losses incurred by the other business. You bear responsibility for commitments agreed upon in the alliance, not separate transactions conducted by your ally company.
However, as a partner, you invest finances and personal assets into the partnership based on your agreement terms. These assets belong to the partnership, as do any profits or property the business acquires. Thus, you share liability for the financial obligations of the partnership. If the company defaults on an obligation, you may need to sell personal assets to cover it.
The endurance of partnerships and alliances
Alliances form to achieve particular shared goals, such as expanding services, promoting products, sharing expertise or developing new offerings. When the purpose of the alliance concludes, the relationship simply dissolves as the independent parties move on. No new agreement gets created.
Partnership companies are somewhat more enduring, though they can fall apart if a partner dies, goes bankrupt or quits for any reason. Still, the remaining partners can create a new agreement to continue as a partnership.
Pursuing a partnership grants shared ownership but also liability. An alliance enables cooperation while preserving autonomy. Evaluate which structure best suits your needs for pooling resources and expanding reach.