- Feb 20, 2020
- 1 Comment
The word partnership in a loose sense represents doing something together for a common good. So partners are usually two or more persons doing something together. Ordinarily, we have partners in business, partners in marriage and even partners in crime.
However, the technical use of the word partnership in business confines its definition.
Therefore, partnership is a form of business as it is with sole proprietorship and company.
In Ghana, the Partnership Act defines and regulates such businesses. According to section one of the Act, a partnership is the association of two or more individuals carrying on business jointly for the purpose of making profit.
Partnership businesses in Ghana are often found in professional practice by Lawyers, Architects, Engineers and Quantity Surveyors. Partnerships are not so common in other business sectors like manufacturing, farming, trade and commerce. In fact, some people say partnerships do not work in our part of the world.
So, what is Equity Partnership and how does it work?
In practice, an equity partnership results when an existing or startup business opens up to other financiers in addition to the entrepreneur for joint ownership of the business. The new part owners make available money as part of capital needed by the business. This is not a loan that will be expected to be paid back with interest by the business to the financier. In addition to capital, the new owners also join with other resources including expert skills, past experiences and useful networks. An equity partner agrees to take on risks of the business together with other owners. In equity partnership, primary income for owners comes from profits made by the business. Partners cannot expect income unless the business makes profit even though those who may be working actively for the business are entitled to wages.
It would be seen that equity partnership is therefore, applicable to all kinds of businesses with various individual and corporate partners as part owners. The ordinary partnership structure that is regulated under the Partnership Act does not allow corporate entities to be partners, however all SMEs can take advantage of the Companies Act to open up to equity partners as shareholders for business funding.
At Propartners, we build and manage equity partnerships to raise capital and other resources for existing or startup businesses and commercial projects. The legal status of our equity partnerships however vary as companies, partnerships or joint ventures with regards to applicable laws.