Topics to address in a partnership agreement

Topics to address in a partnership agreement

On Behalf of | Dec 27, 2022 | Business & Corporate Law |

When you start a business with someone else, one of the most important things that you can do is to sit down and draft a partnership agreement at the beginning. This binding agreement will define what the company is going to look like and the roles that the two of you are going to have within it. It sets the framework for the business that you’re creating.

Making a partnership agreement at the beginning is so important because you can address difficult topics before they actually come up. This allows you to create solutions in advance or to simply take steps that can prevent disputes from arising. Here are a few things that your partnership agreement should address.

Your income

First of all, the amount of money that you and your business partner earn needs to be defined. Some companies are small and the two owners just split up all of the earnings. Other companies are much larger and the owner will take a salary. No matter what payment tactic you use, it’s just important for it to be in writing and for both of you to be on the same page.

Your ownership percentages

Similarly, you need to define how much of the company each of you will own. Is this a scenario where you both own 50%? Or is one person going to be a majority owner and the other will be a minority owner? What you decide can have an impact on many of the other operations. For instance, if one partner owns more than 50%, then they hold the decision-making power for the business.

Dispute resolution

Finally, a partnership agreement can lay out tactics for dispute resolution. Maybe both of you can’t agree on the direction the company should go. What steps do you need to take to make that decision so that the company can stay productive? In some cases, this may even include working with a mediator or going to court.

If you are interested in setting up a partnership agreement, be sure you know exactly what steps to take.