You’ve decided that you’re going into business, but you’re not going to do it alone. You have a business partner. Maybe you intentionally began looking for a partner to start the company, or maybe someone that you know from another area in your life just wanted to work with you on this business endeavor.
Either way, don’t forget to make a partnership agreement. This is a formal contract between the two of you. Below are three areas it should address.
1. Roles, titles and responsibilities
First of all, clearly define your positions within the company. How are roles and duties going to be divided? What titles are you going to have? Who gets to make specific decisions? Understanding your responsibilities and what to expect from your partner can help avoid disputes.
2. Financial concerns
Next, consider the financial side of the equation. How much money will each of you invest in this new business? How much are you going to get paid? What type of payment structure are you interested in using?
3. Options for leaving
Finally, remember that one partner may want to exit the business. This can be chaotic if there is no plan in place, and it could cause significant harm to the company if someone just suddenly decides to walk away. A partnership agreement can set up a structure for how someone should leave. What type of notice do they need to provide? Will they help with finding a replacement? Is the partner who is staying required to buy out the other person’s share?
Although the above can help you get started on your partnership agreement, there are still many more legal steps to take. Carefully consider all of your options at this time.