A business partnership is an arrangement between two or more parties to decide how a business is run as a whole. A partnership can give many businesses an advantage over their competition, such as providing key insights into the market and unique skills, training and resources.
When there’s more than one person making decisions for a business the outcomes can drastically change how a business operates. It’s often important to discuss the finer details of a business partnership within a partnership agreement. Here are a few things to ask as you draft a partnership agreement:
What is expected from a business partner?
It helps to establish the intent of a business partnership as you draft an agreement. This intent can help decide what’s expected from a business partner. For example, what are a partner’s obligations to the business? Perhaps they’re expected to bring in new clientele or establish relations with distributors and manufacturers. Or, a partner may be expected to contribute a certain amount of money each month for large investments.
What does a partner gain from the business?
Most partners expect to get something out of their contributions. Typically, this means that a partner will gain a share of the business’s profits. The partnership agreement should clarify how much a partner earns each month. Furthermore, the agreement may also need to state how much claim a partner has over a business. Deciding how much ownership a partner has of a business can help decide what happens if the partner decides to sell their portion of their share or leave the business.
How are issues resolved with a partner?
There’s always the possibility that there will be disputes in a business partnership. A partnership agreement can decide how a dispute is resolved. The agreement could state that one person has the authority to make any final decisions, that a dispute is handled with legal guidance or that a partnership is dissolved. It’s important to consider every legal option as a business partnership is formed.