The current situation with a hung parliament offers a very interesting parallel to the question facing some entrepreneurs of adopting either a partnership or a limited company status. At a micro level, the issues facing partners within a business are very similar. There is no right or wrong approach, and each business needs to decide individually which structure to opt for. (Of course, this is only an issue where a business has more than one main contributor.)
In my experience, businesses tend to prefer operating as a partnership when there is a desire to retain the full involvement of all members in the decision making processes. It is sometimes felt that if authority is devolved to a particular board member to make decisions relating to certain aspects of the business, then the decision making powers of other key figures within the business will be diluted. And therein lies the challenge, both at a business and political level. But if a business is well governed, this isn’t necessarily the case.
The biggest disadvantage of the partnership structure is that decision-making is slower because each time, a consensus needs to be achieved. The downsides of this are a loss of spontaneity and the ability to capitalise quickly on opportunities. All too often, it’s the “being in the right place at the right time” scenario that has meant an entrepreneur has achieved great success.
And isn’t this exactly what is happening in Government right now? It has taken a number of days for the Tories and Lib Dems to strike a deal and form a coalition government. The view from business is pretty unanimous. They regard a hung parliament to be just about the worst thing that could have happened to the UK economy, just when it looked like the country was starting to climb slowly out of recession. Now we potentially have more uncertainty and no real direction – so let’s hope this new “partnership” Government can make some swift and effective decisions, otherwise, we can expect another Election in the coming months.
Lesley Stalker is Head of Tax at RJP
Leave a Comment May 11, 2010