Have you thought about switching your business structure from a limited company to a limited liability partnership but you kept running into these three concerns:
- “It won’t work for my business because we are too big.”
- “The industry we are in, I just don’t see it working…”
- “Management wise, what does it mean when everyone is a partner, do I lose control of the working relationship?”
Although these questions may seem like dealbreakers, they actually have very simple solutions. Let’s take a look at them one by one.
“We are too big for this to work…”
When setting up a limited liability partnership (LLP), the size of your business shouldn’t be a concern, just look at John Lewis Partnership, which has over 85,500 Partners. The founder’s vision stemmed from having a business that is powered by its people. The next time you step through the doors of a John Lewis & Partners or Waitrose & Partners shop or shop online, just remember that the partners working at the business all had a say in the business, its direction and efforts. Still, think you’re too big to implement the partnership model?
The only word of advice we would offer if you’re a larger business trying to implement the partnership model is to recognise that this may take longer. People can get frightened by the unknown and generally many don’t like change, especially when it has to do with taxes. Therefore, it’s better to take the time to discuss what changes will be occurring in the business if the partnership model is implemented. You should also ask the employees for their feedback and give them enough time to familiarise themselves with any information given about the LLP model.
“A limited liability partnership won’t work in our industry…”
Similar to the size of your business, the industry shouldn’t matter. We’ve established and managed LLPs in every industry background. From care homes to architects to software developers to manufacturers and pharmacists, you name it, we can find an LLP operating in that space, successfully. However, it is not to take away from the fact that some industries and businesses are more prone to having successful partnership models than others. At the end of the day, it comes down to the people within the business to make it work, the rest is just paperwork.
“What does it mean when everyone is a partner?”
Now if there is one question out of the three you should focus on, is this one. Having established LLPs for many years now, we have come to believe that any SME can become a partnership as long as the business is keen to put two things in place; a strong team culture and that everyone should share proportionately in the business’ success and profits.
You see, the other two components, namely the size of a business and industry will all fall into place if the bedrock of the business, which is its people, has a solid foundation built on trust and cooperation.
So what makes a strong team culture? Treating each member as a business owner; making each person within the business feel important in the successes of the business, and ensuring that each person in the business has a voice in the direction of the business.
Such team cultures do not happen overnight, but they can be cultured, and if the business owners and senior management have the vision for such team cultures, they can be successful. They can be started with ensuring all the team is working together, for shared successes, rather than independently for individual bonuses. Next up, share key business information with the team, and make them feel important by doing so. It can do no harm to share key financial information with the team, making them aware of how the company is performing, and where they can help the business succeed.
The sharing of business success and profits is an easy one to achieve. You need to set the policies for doing so in advance of making profits, and this will galvanise the team to work towards their individual goals and rewards, but in turn, will drive the success of the business. Decide on a target profit for the business, and then decide on what portion of additional profit should be shared amongst the partners. Finally, set in place the policy for how these additional profits will be shared, an easy method is to share these in proportion to earnings, so the higher earners get a higher percentage etc.
How to achieve a smooth implementation of the partnership model?
Thinking back to some of our more recent implementations, here are some observations:
- Plan out a timeline for the implementation and allow generous time in between each step.
- It’s great to know when everything is happening, and with a larger team, it’s likely everything will take just that little bit longer. From presenting the plan, and model to each person (yes, this can be done in group sessions), to answering questions from individuals, and finally, allowing the individual’s time to properly read through their joining documents. These in particular can be confusing for some, and many will have questions ranging from simple misunderstandings to more complex questions relating to their own personal circumstances, such as student loans and mortgages.
- Listen to our advice. We have various methods of getting the right information collated, and meeting the legal requirements, so please work with us for a smooth implementation process.
And that’s it, it really is that simple, and that’s why we truly believe that any SME can implement the limited liability partnership model and that once you do, the business will grow and grow.
If you would like to know more, please reach out.