Identifying Leadership Roles in Business
I teach new entrepreneurs about business development all the time, but an area that often gets overlooked is leadership. Being a strong and confident leader is important and there are several coaching principles I can share to enable stronger leadership skills. Today as you think about roles, I want you to think about a different side of business development and leadership. Think more about titles, relationships, and the liability that might come with each.
A client recently expressed a need for a better understanding around business partnerships, identifying who a business owner is, and other team responsibilities. The question has come up with serveral clients this month, so I figured why not write a blog for everyone else out there with similar questions? When you work alone and run your business as a solo entrepreneur it is obvious that you are the owner, CEO, and pretty much all of the other branch leaders of business. You wear all the hats, and eventually you will need to delegate and/or partner with someone. So what happens when you need to hire someone or a friend wants to partner on a new business project with you?
In this article we will explore the definitions and roles of a Business Owner, Business Partner, Collaborator, Independent Contractor, Joint Venture, and a traditional Employee. Let’s dive in!
First and foremost, it is important to note that whether you have a corporation, foundation, or LLC, there will always be a business owner behind the brand. Sometimes we simply like to refer to these people as creators or founders, and sometimes CEOs, but these bosses are just that… the BOSS.
A Business Owner is the key leader of the business and responsible for making sure things operate accordingly. Although forming an official business entity shields business owners in various ways against liability, the business owner is still typically the point of contact and the person people look to for guidance and accountability. You can run a business solo as the owner but you can also bring in people to help you run and operate the business as you see fit. There is no real limit to how many people can join your company or organization, but budget and management responsibilities may play into your decisions as your brand grows. Let’s think of your business like a pyramid… not a pyramid scheme (of course) - but a pyramid nonetheless. At the top you have the Business Owner and he/she can stand alone or with another party. This other individual is recognized as a Business Partner.
The term Business Partner is often loosely used to define anyone who collaborates with you in some way in business. While most people can generally determine what people actually mean through context, it is important to know that the official definition outlines clear business and legal duties.
A Business Partner is essentially a co-owner of the business. They share responsibilities and liabilities and work together to carry out a common goal. Business partners do not always have to have a 50/50 split but should definitely outline their duties, finances, and other specific business details within a business partnership agreement. Similar to an LLC or corporation, you can also choose to establish a business partnership as your formal business entity. This format is simple and free because it does not require formal filing (also the same for sole proprietorships).
When two separate business owners or businesses come together to complete a task or benefit from a project, this is typically referred to as Joint Venture. Joint Ventures are different from a Business Partnership because they are project or venture specific, limited in time, and are not considered a taxed entity. Instead a Joint Venture is more of a business arrangement where people combine resources for a common goal. Again, these people are often casually referred to as Business Partners, despite the actual differences in formal definition. Regardless of the true nature of your relationship, make sure to choose a business partner who shares your passion and takes the business seriously. You want to be able to both trust and also rely on your business partner to truly support you and the business.
Now that you have a better understanding around partnerships and joint ventures, this is a good time to briefly clarify the definition of a Collaborator. Again these words are all very similar and often interchanged, but a collaborator is not usually considered an official business partner. They may be a gym that hosts your monthly free yoga class, an Instagram live guest, event sponsors, etc. The best way to think about it is that a collaborator is typically a less formal arrangement. They do not own or operate your busniess, nor do they acquire any real risk by working with you. This is essentially a temporary business relationships, unless you and the collaborator decide to maintain an ongoing relationship. Despite this step down on the leadership pyramid, you should still utilize contracts to outline the details and expectations for the relationship.
There is a lot of overlap here, but let’s take a look at the next big role of Independent Contractor, also known as freelancer or contractor. These are people you hire for certain tasks, projects, or ongoing roles. They are not employees but can be considered collaborators depending on the situation. Unlike the popular digital title of collaborator, the term contractor actually has legal implications. The main points to remember are:
- They do not automatically transfer their creative license or IP rights to you like an employee typically does;
- They have more flexibility and power surrounding the manner in which they create and complete projects,
- They do not receive employee benefits, and
- They complete W-9 and 1099 not W-2 tax forms
You should definitely consider your budget, tax obligations, and your working style before committing to either hiring an Independent Contractor or an Employee. The largest distinction of an employee is that they are controlled and monitored much more closely by their employer. If you ever worked a 9-5 before starting your business, you will recall following a schedule, answering to your boss regularly, and other structured elements that do not typically come up when you are a freelancer/ independent contracor.
An Employee is basically someone who gets paid a set hourly fee or salary to do a job. It is not mandatory to give your employee healthcare or other benefits, but it is natural that the employee will have different legal rights under employment laws just as they will also relinquish many rights to their employers. As a general note the employer, (business owner) will also have certain liabilities should their employee commit certain wrongdoings in the workplace. This is a much longer tort law conversation, so make sure to speak to your attorney with any specific legal questions on this matter.
If you are ready to build your team as well as your empire, congratulations! It is an intricate feat but also an exciting one. Make sure to check out our other blogs on various business topics and reach out for a consulting or coaching call should you need more hands-on support.
Best of luck on your business journey - so happy you stopped by!
Written by The Boho Business Guide Creator + Business Lawyer, Olamide Michelle. This article is for educational purposes only and should not be viewed as legal advice.