Going into business with someone is like marrying a person. The terms and conditions should be clear and discussed prior to the setting up of the business. Even if your potential business partner is a family member, close friend or investor, these 6 things should be considered in every partnership agreements.
It should be clear from the start who is the owner of the business and the final decision maker. Some business may choose to have more than one owner, but they still need to agree on how they will take decisions and who is the one leading the company. This is also important in case the business is being sold in the future.
Profits and Loss
Are the profits or losses allocated equally or based on the amount of partnership percentage? This part is usually difficult for a lot of businesses but they still need to decide how the profits or losses will be shared. This also applies if the business is closing down or being taken over by another business.
Going into business with someone also means having different ideologies with the other person. While you might think that one idea is better for the business, your business partner might think differently. So how to resolve this conflict? Your partnership contract should include a section where dispute resolution is talked about. All parties should agree on a method of solving any disputes and cannot change it.
Roles and Responsibilities
Make sure to clearly lay out each partner’s role in the business. Who will take care of the finances? What about the marketing and business development section? Will you require a software developer? Make a thorough analysis of each partner’s skills before drafting the contract where the roles and responsibilities of each partner will be written.
Always expect the unexpected with businesses, that’s what makes going into business so exciting! You should always prepare for any eventualities and ensure it is well written on the contract. The procedures to take in case of unexpected or critical situations should be known by everyone involved in the business.
Last but not least, the time off, including leaves of absence, vacations, and sick leaves should be clearly noted in the contract. Each partner should know how much time they can take for themselves and away from the business.
You may go online and search for a lot of different partnership template which you can use; however, the best thing is to hire a lawyer and get professional advice.