When two people decide to start a business together, officially becoming business partners, they may be tempted to simply shake hands and move forward. They both trust one another. They believe that they both have the business’s best interests at heart. They don’t feel the need for any more official paperwork.
But doing this is quite a risk. It is far wiser to use a partnership agreement. This can give the business more stability, it can protect your interests, and can actually lower the odds of a dispute. What types of things might you want to put into that partnership agreement so that they are legally defined and agreed upon by both parties?
Division of ownership
One example could be dividing the ownership of the company. You never want to simply assume that you own 50% of the business. Having it in writing is highly beneficial, and this is especially true if one person is going to be a majority owner. It needs to be very clear that they hold a majority position so that they can make decisions on their own.
Definition of roles
Another thing that the partnership agreement may include is just the definition of the roles that each of you will have at the company. This can really help to avoid disputes in the future. It gives you a very clear idea of the obligations that you have and what is expected. It can even define who gets to make certain decisions or take actions on behalf of the business – hiring employees, designing products, etc.
Setting it up
These are just a few examples of how an official partnership agreement can help a young business. Be sure you know exactly what legal steps to take to set it up so that you protect your future and your business.