What kinds of questions does your partnership agreement need to answer?

What kinds of questions does your partnership agreement need to answer?

| Aug 21, 2020 | Firm News |

You wouldn’t form a business partnership with someone unless you thought that you were compatible and your future together was bright.

But what if it isn’t? Partnerships sometimes come apart at the seams. A good partnership agreement can often prevent that from happening — or at least mitigate the fallout. Here are a few important questions every partnership agreement should address:

  • What kind of money does each party bring to the deal? You need to clearly spell out each person’s financial contributions to your company.
  • Who is the boss? You need to establish a clear division of work and decide who has control over each part of the operations.
  • How do you settle a disagreement? Even great partners are bound to argue occasionally. If you can’t resolve the issue alone, what method will be used?
  • What property belongs to the business? If you’re starting a shop in the garage, you may think the answers are obvious. But who owns the client list, logos, designs and social media sites? Nail down what belongs to the business in case there are problems later.
  • How will income be paid? You don’t want to start out with differing expectations about how the profits will be disbursed (and what has to go back into the business).
  • What happens if someone leaves? One of you may become incapacitated, die, retire or simply move on. What happens to that person’s share of the business?
  • Is there an exit strategy? Maybe your entire goal is to build something that attracts a larger brand’s attention so that you can sell your company for a profit. Are you and your partner on the same page about how that should happen and what price is the trigger?

Good partnership agreements take planning and skill. Don’t be afraid to get experienced legal assistance with yours.

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