A business partnership agreement is a contractual agreement that people can use when starting a company together. It is a step that some partners are tempted to skip, often because they are on good terms and trust each other, so writing a contract does not seem all that important.
However, it is very important to have this document on file. Not only can things change in the future, but the partnership agreement can help avoid some of the most common conflicts by forcing partners to address these issues upfront. Below are three different reasons that you may want to use one.
1. Defining your ownership percentage
First and foremost, you need to know exactly what share of the business you own. Do you own 50% of the business, or are the shares split unevenly? If they are divided unequally, what does that mean for the decision-making power that both partners hold? Plus, your ownership percentage defines the value of the company to you personally.
2. Roles and responsibilities
Next, the partnership agreement can be used to establish your official roles within the business and the responsibilities that go along with them. This ensures that everyone knows what is expected of them, and it can also help avoid disputes because people are not stepping on each other’s toes.
3. Conflict resolution strategies
Finally, if a conflict does arise between the two of you in the future, how do you resolve it? What decisions require a vote? When do you need to bring in a mediator? Having a plan to resolve conflicts can help things go smoothly for the company.
These are just a few things to consider when drafting a partnership agreement. Be sure you know what legal steps to take at this time.