Are you looking to start or join a business partnership? This could have great potential for you and your business.
It can benefit you to make an agreement before agreeing to start a partnership. Here is what you should consider adding to this legal arrangement:
Roles and rights of each party involved
A business partnership agreement can establish how each party makes decisions and their obligations. Defining roles and rights can help avoid potential disputes within the partnership. Each party can be given a role that best suits their strengths. Terms of the partnership agreement can also clarify how larger decisions for the business are made, including establishing a checks and balance system. Without clarifying responsibilities and limitations for each party, there is a potential for dispute.
Term of the partnership
Many business partnerships operate until certain goals or milestones are met. This could mean that a partnership will last for several years. However, an agreement can also set a specific date for when the partnership ends. Once this date is met, the partnership could have the potential to continue under new, altered terms. Considering the duration of a partnership is an important aspect of an agreement.
Split of profits, losses and liabilities
All parties involved in a partnership seek to gain something from the business. How profits are split can ultimately be decided by how much authority each party has. Likewise, the parties who serve to gain the most from the business may also take the largest loss if the business is not profitable. Parties with more authority and profit from a business may also be most liable for any legal issues.
Dispute resolution
One of the biggest and often overlooked aspects of a business partnership agreement is how disputes are resolved. Partnerships always have the potential to lead to disputes. An agreement can establish the best course of action when an issue continues unresolved between parties.
Legal guidance is available for business owners wishing to start a partnership. Business owners can learn more about their legal options before agreeing to a partnership agreement.