Starting a business is a big investment for individuals. Some people will start a business with a partner to cut down on expenses and responsibilities. Business partnerships require a lot of trust. But, more importantly, efficient business partnerships often require a strong partnership agreement.
Partnership agreements outline what each party expects from a professional relationship. An agreement can also reduce disputes and liability issues. Here are a few important matters to discuss when outlining a partnership agreement:
1. What is the purpose of the partnership agreement?
Each party should be on the same page when discussing the terms of a partnership agreement. Parties should know what type of business operations they are getting involved in, how long the partnership is meant to last and what the partnership is meant to achieve.
2. What does each partner need to contribute?
Are both partners expected to put their fair share of work into a business or is one partner contributing more capital to get a business off the ground? Parties should be aware of their roles in a business, such as who is meant to recruit employees, balance the finances or acquire licenses and have these responsibilities outlined in an agreement.
3. What does each partner stand to gain?
Business partners, typically, do not invest in a business as a hobby. Parties expect something in return for investing and building a business. A partnership agreement should include how much each party earns and loses from a business.
4. Who makes decisions for the business?
Business owners have to make a lot of important decisions every day. Business partners may need to outline how important matters are decided for the future of their operations.
5. How are disputes resolved?
Disputes happen no matter how much business partners get along. A partnership agreement needs to clarify what happens if a serious dispute cannot be resolved.
Professional legal guidance can help potential business partners draft a strong partnership agreement and settle disputes.