According to Forbes, small businesses make up over 99% of newly established enterprises in Colorado, and some of them are set up as limited partnerships.
Starting a partnership with one or more partners can be a powerful way to combine skills, resources and ideas. However, they are not without their challenges, and disputes can arise. To maintain a harmonious business, it is essential to establish clear expectations and guidelines from the start. One way to achieve this is by creating a comprehensive partnership agreement.
Defining roles and responsibilities
A key aspect of a partnership agreement is that it clearly outlines the roles and responsibilities of each partner. This lays the foundation for smooth collaboration and helps avoid potential conflicts by ensuring that everyone is on the same page about who does what in the business.
Profit and loss sharing
A partnership agreement specifies the division of profits and losses among partners. Whether it is an equal split or a different arrangement, having this in writing can prevent financial conflicts in the future.
Decision-making procedures
Being on the same page and making decisions together is an integral part of a partnership. To minimize arguments down the road, an agreement outlines the decision-making process that the business will follow.
Dispute resolution
Even with the most detailed partnership agreement, conflicts may arise. Include mechanisms for resolving disputes in the arrangement, such as mediation or arbitration. Having a plan in place can help partners navigate challenges more amicably.
Exit strategy
Life can be unpredictable, and partners may need to part ways. To handle this, your agreement should include an exit strategy that details how one partner can leave the partnership or sell their share of the business.
A partnership agreement is a valuable tool that can ensure a more harmonious and successful business relationship.