Forming a business partnership can be complicated. This is especially true if your business has several facets or if you have more than one partner.
It’s possible to reduce possible conflicts by creating an acceptable and clear business partnership agreement. This legal document explains how the business will operate and how partners interact and relate to each other.
Not all partnership agreements are the same, and some clauses are more important than others.
Individual party’s contribution to the partnership
The contributions each partner makes to a business vary based on the purpose of the partnership. While one partner may provide start-up capital for the business, another may offer operational or managerial skills.
Be sure each partner’s contributions are stated clearly in this agreement and the consequences if they fail to live up to these obligations.
Allocations for profits and liabilities
You form a partnership to earn a profit. Your partnership agreement must indicate how the profits you earn will be shared. It’s also important for the agreement to address how losses are handled.
Decision-making rights
When you start a partnership, all parties will have some type of vested interest. Because of this, every partner will have the ability to make certain decisions regarding business operations. It’s important to outline what decisions each partner has in the partnership and include this in your agreement. It will help reduce conflict and questions down the road.
Getting your partnership off to a good start
Creating a partnership agreement with these elements is a must if you want to give your partnership the best start possible. You need to make sure all aspects of the partnership and everyone’s rights are outlined in this document to prevent conflicts and other issues in the future.