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Is a Partnership Right for Your Business? Statistics on Partnership Prevalence and Success

By: Jack Nicholaisen author image
Business Initiative

In the ever-evolving world of business, partnerships have become a prevalent choice for entrepreneurs.

This article will take you through a statistical analysis of the modern business landscape, focusing on partnership formation rates, success rates, and the advantages and disadvantages of this business structure.

By the end of this article, you’ll be equipped with the knowledge to make an informed decision about whether a partnership is the right choice for your entrepreneurial endeavors.

Let’s dive right in…

Partnership Formation Rates

Partnerships have gained popularity in recent years, with more entrepreneurs opting for this business structure.

According to the U.S. Small Business Administration (SBA), partnerships accounted for 8.8% of all small businesses in the United States as of 2021.

This number has been steadily increasing over the past few years, suggesting that more entrepreneurs are recognizing the benefits of partnering with others to grow their businesses.

Globally, the trend is similar.

According to Statista, the number of partnerships in the United Kingdom has been steadily rising since 2014.

This growth suggests that entrepreneurs worldwide are increasingly aware of the advantages a partnership can offer.

Success Rates

While partnership formation rates provide insight into the popularity of this business structure, it’s crucial to consider success rates to better understand its effectiveness.

According to a study by the Harvard Business Review, the success rate of partnerships tends to be higher than that of solo entrepreneurs.

The study found that businesses with two founders were 19% less likely to scale prematurely and had a 30% higher chance of having a successful exit (such as an IPO or acquisition) compared to solo-founded companies.

However, it’s essential to note that not all partnerships are successful.

A study by Noam Wasserman found that 65% of startups fail due to conflicts between founders.

This statistic highlights the importance of choosing the right partner and ensuring that both parties are aligned in their goals and values.

Advantages of Partnerships

There are several advantages to forming a partnership, which may explain the increasing formation rates:

1. Complementary Skills:

Partners can bring different skill sets to the table, allowing each person to focus on their strengths, ultimately leading to a more productive and efficient business.

2. Shared Responsibilities:

In a partnership, the workload and decision-making responsibilities are distributed, reducing the burden on each individual and enabling more informed decisions.

3. Increased Financial Resources:

Partners can pool their financial resources, providing the business with more capital for growth and development.

4. Expanded Network:

Partners often have different networks, which can be leveraged for business opportunities, advice, and support.

5. Enhanced Credibility:

A partnership can enhance a business’s credibility by bringing in partners with established reputations or expertise in a specific industry.

Disadvantages of Partnerships

Despite the advantages, there are also potential challenges associated with partnerships:

1. Potential Conflicts:

As mentioned earlier, conflicts between partners can be detrimental to a business’s success.

It’s essential to choose a partner with whom you can communicate effectively and resolve disagreements constructively.

2. Shared Profits:

In a partnership, profits must be shared among partners, which may lead to disputes if expectations are not clearly established from the beginning.

3. Unlimited Liability:

In a general partnership, each partner is personally liable for the business’s debts and obligations.

This means that if the business fails, partners may be responsible for covering these liabilities with their personal assets.

4. Less Control:

Sharing decision-making responsibilities also means that each partner has less control over the business, which can be challenging for some entrepreneurs.

The 6 Step Guide to Establishing Your Own Partnership

Are you considering forming a partnership for your business?

Here’s a step-by-step guide to help you establish your own partnership:

1. Choose the Right Partner(s):

The success of your partnership depends on choosing the right partner(s).

Consider factors such as shared values, complementary skill sets, and compatible work styles. This article provides some valuable tips for choosing the right partner.

2. Create a Partnership Agreement:

A partnership agreement outlines the terms and conditions of your partnership, including profit-sharing, decision-making processes, and dispute resolution procedures.

Here’s a template to help you get started.

3. Register Your Partnership:

Depending on where you live, you may need to register your partnership with local or state authorities.

Check with your local government to see what requirements apply to you.

4. Obtain Necessary Licenses and Permits:

Depending on your business type and location, you may need specific licenses or permits to operate legally.

This resource can help you determine what licenses and permits are necessary for your business.

5. Get an EIN:

An Employer Identification Number (EIN) is required by partnerships that have employees or file certain tax returns.

You can obtain an EIN from the IRS here.

6. Open a Business Bank Account:

It’s crucial to separate your personal finances from those of your partnership by opening a business bank account.

This will also make it easier to manage finances and track profits and losses.

By following these steps, you can establish a successful partnership for your business.

Good luck!

In Conclusion…

Partnerships have become an increasingly popular choice for entrepreneurs in the modern business landscape.

With higher success rates compared to solo-founded businesses and numerous advantages such as complementary skills and shared responsibilities, it’s no wonder more entrepreneurs are considering this business structure.

However, it’s crucial to weigh the potential disadvantages and carefully choose a compatible partner to ensure the partnership’s success.

Are you ready to take the plunge and form a partnership?

Keep these statistics and factors in mind as you make your decision and embark on your entrepreneurial journey.

Remember, the right partnership can be the key to unlocking your business’s full potential!

Knowledge is power, and by sharing this information, you’ll be helping others make informed decisions about their own entrepreneurial paths.

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These sources provide valuable information and insights into partnership formation rates, success rates, advantages and disadvantages, and establishing a partnership.

We encourage you to check them out if you're interested in learning more about partnerships in modern business.

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About the Author

jack nicholaisen
Jack Nicholaisen

Jack Nicholaisen is the founder of After acheiving the rank of Eagle Scout and studying Civil Engineering at Milwaukee School of Engineering (MSOE), he has spent the last 4 years disecting the mess of informaiton online about LLCs in order to help aspiring entrepreneurs and established business owners better understand everything there is to know about starting, running, and growing Limited Liability Companies and other business entities.