You’ve found the perfect partner for your business. You really feel that you can trust them and are excited to start working together. Before you jump into anything, it’s essential that you first protect your business. The first step to a successful partnership is to create a written partnership agreement.
Why should I have a partnership agreement?
When you and your potential business partner sit down and discuss your business in detail, it can be hugely beneficial. It will help you both understand your perspectives and what will be expected of you. It will give you the opportunity to identify and discuss potential conflicts, and how you will deal with others if they arise. Finally, creating a partnership agreement will help you know how to handle big decisions and the possible end of the partnership.
What goes into a partnership agreement?
Creating a partnership agreement is meant to be tailored to your specific business. You can use your agreement to discuss just about anything that you think will help increase your chances of success in the future. Here are a few things that you should talk through:
- Name of the partnership or business
- Contribution of money, property or services
- How you will distribute profits and losses
- Roles and duties of each partner (who manages employees, handles certain departments, etc.)
- Authority of each partner to bind the partnership
- Decision-making roles and authority
- Dispute resolution strategies
- Communication strategies
- Process for adding new partners
- Options for ending the partnership or business
- What to do in case of the death of a partner
While not all these topics are exciting to discuss, it’s crucial that you and your potential partner make decisions before going into business together. Talk through your expectations for one another to better set yourselves up for success and prepare yourselves for the real work.