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Areas to cover in a partnership agreement

On Behalf of | Jan 25, 2024 | Business Law |

If you start a business with someone else, don’t just agree to work together through a handshake deal. Sit down and write out an official partnership agreement. Starting a business is a major step, and you need to protect your interests.

But what should go in this partnership agreement? If this is your first time doing it, here are a few things you want to include.

Details about money

Often, business disputes between partners revolve around money. It’s good to talk about this in advance. How will you divide up the money that the business earns? Do you get a salary or hourly wages? If the business has extra money, do you reinvest it? How are the two of you going to invest your own money in the company? Who covers the business’s expenses and costs?

Details about ownership

Next, many business partners each own 50% of the business. This is a fine structure, but don’t assume it’s automatically true. The business partnership agreement should define your ownership percentages. This is very important if you ever decide to sell the company or if you run into disputes while trying to make decisions.

Dispute resolution tactics

Speaking of running into disputes, your partnership agreement can help you address them. It can tell you what tactics to use – such as litigation or mediation. It may also be able to provide guidance and answers to resolve some potential disputes in advance.

Drafting your agreement

It’s wise to consider your partnership agreement carefully before starting a business. Be sure you know exactly what legal steps to take and how to adjust the agreement for your unique situation.