It’s helpful to use a partnership agreement when you’re starting a new business with someone else. That relationship needs to be officially defined. This can help to prevent disputes or confusion in the future.
But you may never have started a partnership before. What types of things should the agreement address? What provisions do you need to put into it? Here are a few examples.
What are your responsibilities?
First of all, just think about the roles the two of you are going to have in the business. If there’s too much overlap, it can cause disputes. It may be helpful to define areas that you will each be responsible for – such as noting that one person is in charge of marketing and contacting customers, while the other is more involved with product design or manufacturing.
What is your ownership percentage?
The most important thing to note is the ownership percentage of the business that you actually get. Don’t assume that it’s 50%. Not only is it important to know about your ownership percentage in case you sell the business, but it also impacts how the two of you will make decisions moving forward.
What happens if someone leaves?
It’s also wise to consider what happens if someone leaves the partnership. Maybe they want to leave and start a new business. Maybe your business partner passes away unexpectedly. Maybe they just want to quit because they’re no longer interested in working at the company. How will you handle such an exit?
These are just three areas to address with a partnership agreement. It’s important to carefully consider all of your legal options when starting a business.