Partnership agreements are useful business contracts when two or more partners decide to start a company together. It’s very important to take these steps at the beginning to prevent disputes and other issues in the future. Business partners are sometimes tempted to work together unofficially, but that could be highly detrimental to the long-term success of the company.
A partnership agreement is going to be different from one situation to the next. Below are three areas that it is usually wise to address.
What happens when someone leaves?
First of all, there’s a chance that one of the partners will either pass away while still working at the business or decide to leave for their own reasons. What happens to their ownership percentage when they leave? Are they free to do this at any time, even if it would harm the business’s chance of success?
How are disputes resolved?
Additionally, even partners who typically get along very well may encounter disputes about different creative visions or the direction they want the company to go. A partnership agreement can include some dispute-resolution tactics. It can also provide guidance, such as stating what decisions need to be put to a vote or what different roles and responsibilities the partners have – and the specific decision-making power that goes along with those roles.
Addressing financial concerns
Finally, the partnership agreement should generally address the major financial concerns the business has. How much money will each person invest? How much will each business partner be paid? What ownership percentage do they hold?
This can help you get started when drafting a partnership agreement. Just make sure you know what legal steps to take to officially get it in place before launching your company.