After all your efforts working on your business proposal, finding the right location and securing all the necessary equipment, you and your partners are ready to open your business. Have you carefully examined your partnership agreement for potential hurdles?
In this post, we spotlight several items to include in every partnership agreement. Look to see if you’ve missed anything.
Take careful note of how you plan to distribute profits among partners. There could be a hierarchy of payments, or partners may receive a specific percentage of profits. Whatever you decide together, note it on a signed contract.
You and your partners likely contributed to the creation of your business. Note specific contribution amounts in terms of dollars, time, work, responsibilities and anything else that contributes to your company’s operation.
Down the road, either you or your partners may move on from the business. How do you plan to handle ownership distribution if that happens? You may like the sound of a buy-out, or one of you may want to bring in a replacement partner. This part of your partnership agreement could benefit from a non-complete clause, in case you do not want departing partners to become competitors.
You and your partners may get along great now, but who knows what the future holds? Your partnership contract should specify how you want to handle disputes, such as turning to a professional mediator or arbitrator. Think of this as the prenup portion of your agreement.
Partnership agreements should serve to avoid unnecessary frustrations and business disasters. Make sure yours prepares you and your partners for debates and disagreements.