Partnerships in Domestic Landscaping: Risks, Responsibilities and When They Work
Following on from a recent article posted in The Library concerning Expanding Your Garden Maintenance Business, some questions were posed regarding the value or otherwise of forming Partnerships in the world of Domestic Gardening, including Landscaping and Design & Build firms. The primary question concerned the advantages of working with others in a formal manner as possibly being a way forward to building a more solid foundation for the future without becoming involved in directly employing people in order to expand. In other words, increasing the number of working hours in a year by working with, instead of, employing them on a formal basis.
I am not a solicitor, and the following text is presented as personal comment, gleaned from working many years as an expert witness and landscape consultant. It is partially anecdotal by nature to reflect that experience.
There are obviously other reasons for Partnerships to be set up that will vary from this particular question, including couples deciding to become partners in a shared business for reasons of tax benefits, but I am not including these in this article. The best and only person who can answer those questions are Accountants!
Partnerships have Legal status, and should not be lightly entered into. The ramifications of making an error of judgement by choosing the wrong partner can be problematic for various reasons.
Partnerships, by definition, are a legal form of business operation between two or more individuals who will share the profits, management costs, responsibilities and all other obligations. It can exist without a written agreement, although formal documentation is recommended for reduce future issues. They will also share the losses and consequences of the actions of the Partnership in all matters concerning that relationship.
Partnerships may be two or more individuals or companies working together as a General Partnership or Limited Liability Partnership (LLP). A Business Partnership is a specific kind of legal relationship formed by a written agreement between two or more individuals or companies to carry on business as Co-Owners. All Parties will be liable for, and responsible to the other Parties for all matters concerning investment and profit taking by agreement with the other Partners. All Parties shall be responsible for investment and future Partnership Planning, each taking a share of the responsibility and cost of such planning as agreed between Parties.
What is a Partnership?
General Partnerships and Limited Company Partnerships differ materially from Limited Liability Partnerships in legal status and liability.
Each will make a contribution, which may or may not be equal (unless otherwise agreed in writing), a division of the profits, co-ownership of contributed assets, responsibility for all due compliances regarding matters of legislation and ensuring that the Partnership is legally sound in all matters of the Law, Health and Safety, due diligence in respect of The Ordinances of The Realm (Transport Law, Waste Carriage Licences etc)
Even if a Partnership is not formally ratified by Legal Agreements, such an arrangement may be held as accepted in any event.
Evidence that such a Partnership existed – even after it may have been dissolved by the Parties – and therefore responsibilities remain to be shared by those Parties, may be established in various ways.
If headed notepaper was printed with the names of the Partners on that document, is sufficient evidence to prove the partnership existed. Even if the paper was never used by the Partnership (i.e. no letters were ever written on the paper) it’s very existence could be deemed sufficient evidence in certain circumstances, (although it is unlikely to be determinative on its own).
In practice though, headed paper listing individual names may be taken into account as part of a wider body of evidence. Without being absolutely conclusive in its own right, headed paper should not be printed without an appreciation of its ramifications for the future.
Parties that shared the cost of owning property jointly, administering business operations jointly, perhaps designing and building a Show Garden or Exhibiting at an Event jointly, making capital investments jointly – all will be seen as evidence of the existence of a Partnership.
There are three types of Partnership. General Partnership – Limited Partnership and Limited Liability Partnerships, the latter rarely if ever seen in the Domestic Gardens or Landscape world. The choice of which type to adopt should be agreed with a Solicitor or Accountant, as being the best suited for your stated purposes.
These cover legal matters such as exit clauses, dispute resolution, areas of responsibility, company valuation and limitations (if required) of liability. Partnerships do not issue shares. Shares are issued by the company, although a partner may sell their interest in the business.
Simply setting up a Partnership to enable two or more individuals to work together as a Team is fraught with potential problems unless the matter is formalised in writing. An association presented publicly must be able to be tested.
A high proportion of formal partnerships fail, because they were not established on clear vision and shared goals beyond a general desire to increase turnover and productivity. Those Partnerships that do not adequately define the vision and reason for existence will be founded on nebulous logic and wishful thinking.
Successful Partnerships
A successful Partnership is founded on shared trust, complementary strengths, talents of the individuals, personalities and background, experience and a willingness to share the effort required to build a solid business with a clear and achievable goal in mind. Without shared dreams and plans, with firm agreements regarding roles and responsibilities in place, and agreed allocations of time, money and effort made with a genuine desire to achieve whatever you set out to do jointly, the Partnership will struggle to succeed.
All too often, Partnerships fail because one Party fails, or is perceived by the other to have failed, in their share of the agreement. When one Party spends too long on the Golf course, entertaining potential customers while the other Party is slaving in the office, taking all the flak from irate existing customers, over spending on a new Company car before the agreed time for changing the old one, taking an excessive amount of holiday, arriving every day with a hangover – all of these personal niggles can be the cause of failed Partnerships.
If one side is unwilling to make the same level of commitment or personal sacrifice, conflict will arise. One side making a greater financial contribution, whether in terms of money or time, than another will also cause resentment and failure.
It must be borne in mind that all Partners are legally liable for all decisions, actions made or not made by the others.
Thorough Business Planning before you start out on a Partnership venture is crucial to the success of that Company. Realistic cash flow figures, based on a thoroughly researched market strategy, with checks and balances in place in case one element of the plan fails to be achieved in time for the programme (e.g. snowy weather may affect the income forecasts, requiring equal additional funding injections by the Partners) will need to be recognised, and when something unexpected happens, the contingency plans are already in place and agreed.
It is certainly important that all Parties know and agree their respective thoughts and wishes for the future. An important Partner at the time of starting the venture may be looking to retire in a few years’ time. The major benefit to the Partnership is that person’s primary input into the business plan may be due to their reputation and status within the industry. But their input is limited by their age, and careful plans should be drawn up to ensure that their role changes as they grow older, and their ability to maintain a strong income stream will be reduced accordingly. Yet without their status and credibility, the project would have less of a chance of success!
If a Partner has plans to become a major player in the Gardening world, opening up a Franchise operation with dozens of satellites around the country, that ambition must be shared by the rest of the Partners, otherwise failure looms.
A problem that is often overlooked is the responsibility that each Partner has to the business, to be open and honest with the others. If one Partner becomes bankrupt, or is in danger of losing their good standing for any reason, the others must be made aware. An individual’s bad debts will become a problem for all Parties should they simply disappear overnight, leaving the others to pick up the tab if they spent unauthorised money!
Historically of course, some of the most successful businesses have been (or are) originally Partnerships. Boyle and Quayle, Mercedes and Benz, Rolls and Royce, Marks and Spencer et al.
If the Partnership is a success, there is every likelihood that one person may wish to sell their interest, and a new and exciting prospective Partner hove into view. Or the Partnership may expand with more talented people joining the Company, providing an ability to expand and grow, with new talent and skills becoming available is just another thing to take into consideration and build in to your initial long-term planning when setting up.
Careful planning, solid commitment from all Parties, realistic and achievable, measurable goals, lots of research and sound foundations are the key to succeeding in forming Partnerships.
