Starting a business can be overwhelming to say the least, but when you are setting up a business with a partner, there are additional things to take into consideration. A partnership is when at least two people run and own a business together. Each partner will own a part of the liabilities and assets of the business.
When more than one person is making the decisions for a business, certain aspects need to be addressed. Having a business partnership agreement in place will help detail a lot of those aspects and avoid issues and disagreements in the future. Below is a list of tips that you should consider addressing in your partnership agreement. An experienced business law attorney can help you draft an agreement that addresses these issues as well as others that might be beneficial for your partnership.
- Contributions: The stake that each partner has in the formation of the business as well as ongoing finances of the business should be clearly laid out. Define what each partner will contribute, not just financially, but also in time, effort, equipment, etc.
- Ownership: If something happens down the road in regard to ownership, which partner will get what? Where do your partners stand on adding new partners? What will happen if one partner decides to withdraw from the business? Your agreement should describe how the interests of each owner should be handled in the event of the above scenarios as well as a partner’s death, bankruptcy, or retirement. You may also want to consider adding a non-compete clause in the event one of the partners leaves on bad terms and starts another company.
- Distributions: Of course, you are in the business to make money. Consequently, your agreement needs to detail how business profits will be split among the partners. How much will each partner be paid and who gets paid first? Also outline if the partners are paid a salary and what that salary will be.
- Decision Making: No matter how well you and your partner get along, at some point you will not agree about everything. You need to define how long-term decisions and day-to-day operations will be made. Identify which decisions will need a unanimous vote and which can be made by just one partner. If you set up a clear decision-making structure that is easily understood by everyone, you will lay the foundation for a more friction-free environment.
- Dispute Resolution: No one ever wants to think about this, but if things get nasty between the partners of the business, how will you handle a dispute? Your agreement needs to define the process for resolution. Do you want to require mediation? Will arbitration be used to settle disagreements? Remember, if you take your dispute to court, lawsuits will be public record.
- Dissolution: If you decide to end your partnership legally, you need to have a plan for how that will occur. Some state laws govern dissolution of your business and an experienced business law attorney can help advise you of what requirements there are for your situation.
Contact an Experienced Business Law Attorney Today
If you are in the beginning stages of building a business with at least one other business partner, you need to get your business started on the right foot. A business partnership agreement needs to be part of the plan. The attorneys at the Law Office of D. Hardison Wood can help you ensure that your partnership agreement addresses all the needs for your business and be certain that you are getting your business off to a great start. Contact us today to schedule a consultation.