Partnership Needs More Than A Handshake
When you are operating a business as a partnership you should always have a written partnership agreement. This is true whether it’s family members or your best friend. You and your partner may agree on everything in the beginning, disputes may arise later. For example; one of you may die and leave your partner to deal with the deceased heirs. The need for a written agreement can be summed up in just 2 words; “things change”.
What should be included in your partnership agreement? Using the basic provisions of a partnership agreement should include;
* The names of all involved parties
* The company name
* The type of business
* The location of the business
* Management division as well as the responsibility of each partner.
* Initial capital contributions (or services in lieu of capital).
* How and when additional capital contributions may be required.
* How profits and losses will be shared.
* How much of the profit is to be distributed and how much is to be left in the company for growth.
* The anticipation major events and how to deal with them. For example, if one partner dies, what are the rights and obligations of the other partner/s? Under what circumstances can a partner leave, retire, or be expelled? What are the financial arrangements for departing partners? How long must an ex-partner wait before starting a competing business?
Although a partnership agreement can’t possibly address every possible contingency, you might consider an arbitration clause to handle disputes that you and your partner/s can’t resolve on your own. Without such a clause, you may face a very expensive lawsuit to settle disputes.