Entering into a partnership is a big decision. If everything works out as planned, it can benefit you and your new company in a variety of ways. Conversely, if your partnership is doomed from the start, it won’t be long before your business is heading down the same path.
Do you need a partnership agreement?
In an overall sense, no, you don’t have to create a partnership agreement. However, if you want to make the most of your relationship, while giving the both of you the ability to protect yourself, it’s a must.
There are a variety of details to include in your partnership agreement, such as:
· Responsibilities: By outlining this up front, it’s much easier to avoid a situation in which you squabble over who’s supposed to do what. Take the time to carefully write out all the responsibilities of each partner. And when these responsibilities change, which is sure to happen as your business grows, amend your partnership agreement.
· Financial allocations: You go into business with your partner with the idea of making money. And for that reason, you should outline how you’ll allocate funds. Just the same, make it clear as to how the company will deal with losses.
· Departure: There may come a time when you or your partner wants to leave the business. For example, your partner may want to take on a new opportunity in a new field. Or maybe your partner passes on unexpectedly. Separating from a business can turn things upside down, so it’s critical to have a plan in place.
· Dispute resolution: It’s your hope that you never run into trouble with your partner, but a disagreement could soon turn into something more serious. If that happens, it’s nice to be able to turn to your partnership agreement and go through the dispute resolution steps you’ve laid out.
While you’re sure to include other details in your partnership agreement, you should definitely find a place for these four. When you create an ironclad partnership agreement at the outset, you and your partner will feel better about going into business together. And that’s all you can ask for when getting the wheels in motion.