Creating a partnership agreement is one of the best steps you can take when you launch a business with someone else. You don’t want to just agree on things verbally or assume that you’re both on the same page. A partnership agreement allows you to get everything in writing and discuss specific terms to guarantee that you’re both looking at this from the same perspective.
But what should go in that partnership agreement? Here are a few examples of things that you should address.
Your duties and responsibilities
Partners sometimes run into conflicts when they both believe that they are supposed to be performing the same duties or there is an overlap in their responsibilities. It is best to clearly define who is responsible for what so that you can work together, rather than against one another.
How to make key decisions and resolve disputes
Additionally, remember that you and your partner are not necessarily going to agree on everything for the entire life of the business. You need to know how to make decisions together and it can help to have a set procedure that you can follow. It’s also wise to consider what needs to happen if there is a dispute. How do you resolve it if there are only two partners?
Ownership percentages and earnings
Finally, many disputes simply revolve around money. This could include the amount of money that you each expect to invest into the business, the ownership percentage that you plan to have due to that investment and how much each of you will take home in earnings.
This can be very different from one business to the next. For example, there are businesses where people will simply split the monthly earnings between each other. There are other businesses where each partner takes a salary and they reinvest any other money into the business. Each tactic is fine, but you need to make sure that you both understand how this will be addressed.
As you work to set up your partnership agreement, you don’t want to overlook anything. This document can give your business and your future a lot more stability. Be sure you know what legal steps to take.