If you are starting a business partnership, it is generally wise to use a business partnership agreement. This serves as a contract between you and your new business partner.
One of the main benefits of doing this is that it gives you a way to quickly and fairly resolve potential disagreements. You can identify preferred dispute resolution tactics in advance.
Additionally, having a contract in place helps to clearly outline your rights and responsibilities within the business. Disputes sometimes arise due to things like the division of revenue or the ownership percentages that each business partner holds.
By having a contract in place in advance, it can sometimes avoid these disputes entirely. If they do occur, the contract provides written documentation that can resolve the issue.
What should your partnership agreement include?
Naturally, every partnership is unique, but some areas to address include:
- The name of the business or the partnership
- The expected contributions from each partner
- The percentage of ownership that each partner will receive
- How you will divide both profits and losses
- What authority each partner has to make certain decisions
- Steps that should be taken if one partner wants to leave the partnership, or if they pass away
- How the two of you should resolve any disputes that do occur, despite having documentation in place
Often, just by having these conversations in advance and making critical decisions while drafting the paperwork, disputes become less likely. But they are still possible, especially as a partnership grows and the value of the business increases. If you and your partner find yourselves involved in such a dispute, be sure you know exactly what legal rights and options you have.