Starting a business without help can be tremendously difficult. By contrast, if you work with a partner, you have someone with whom to split important duties. You also have help solving complex business-related problems.
Even if you choose the right partner for your venture, you need a foundational document that governs the type of partnership you form. While the exact language of your partnership agreement probably depends on your business objectives, you may want to include the following three broad topics.
While you and your business partner must contribute to the venture, your contributions may not be equal. Regardless, when drafting your partnership agreement, you must address ownership. Typically, ownership matches each partner’s contribution, although you likely have flexibility to define ownership as you and your partner see fit.
2. Profit and loss division
If your partnership is successful, you and your partner must know how to split the profits. You must also understand how to allocate loss. Your partnership agreement should cover both contingencies. Similarly, the agreement should have a framework for dealing with a partner withdrawal or death.
3. Decision-making duties
When you are your partner are getting along, you may agree about how to operate the partnership. If a dispute arises, though, your partnership agreement should indicate how to resolve it. Likewise, the agreement should designate which partner has primary decision-making authority.
Put simply, if you can refer to a well-drafted partnership agreement when making business decisions and resolving disputes, you boost your chances of having a successful business venture with your chosen partner.