When starting a business partnership, one important step to take at the beginning is to draft a partnership agreement. This can make the business more stable and also help protect your rights.
As a contract, your partnership agreement can address anything relevant to your business, which will be unique in each case. However, here are some of the main areas you may want to consider.
Division of finances
Your partnership agreement should outline how you will divide profits from the business. How much will go to each business partner, and how much will be reinvested in the company? You can also discuss financial obligations, such as how debts will be handled.
Roles and responsibilities
The agreement should specify each partner’s role within the company and the responsibilities that come with it. This can help reduce conflicts by ensuring that partners are not working against one another or debating who has authority over specific decisions. Clearly defined roles allow the business to operate more smoothly.
How to handle key changes
Your partnership agreement should also outline procedures for major business changes. For example, if one partner wants to leave, will the other partner have to buy them out? If you want to bring on another partner to expand the company, does it require a vote? What steps need to be taken to officially add them to the leadership structure?
These are just a few of the many potential considerations when drafting a partnership agreement. Be sure to carefully explore all of your legal options to ensure that your business is set up for success.