It is impossible to remove risks when establishing a business partnership. In these situations, parties can use an agreement to formalize stakes and procedures while minimizing possible issues. Finalizing a partnership agreement can be lengthy, involving various stages of meetings and negotiations. Still, these steps can be necessary to address multiple concerns based on the business’ nature and operations.
Drafting this type of contract could need thorough discussions involving other experts to cover all possible pitfalls. Partners should consider including the following before signing the partnership agreement:
- Clarify the partnership type, depending on the specifications required by each partner. This component could impact dissolution procedures, profit distribution and ownership rights.
- Determine official details for the business, potentially using the partners’ names and headquarters. The agreement can also establish the business founding date, contact details and each partner’s contribution.
- Include a section detailing management terms and conditions. This information is vital to formalize each partner’s stake, responsibilities and percentage of interest.
- Indicate the liabilities of each partner. This section can clarify the designation of debts and other obligations.
- Establish procedures for meetings and voting necessary for decision-making. Properly regulating these processes might minimize disputes when planning and conducting significant business changes.
- Formalize proper steps for entrances and exits of partners. These developments could be inevitable, requiring input from existing partners. Having guidelines for these instances can help maintain order and fairness, considering the needs of the business.
The partnership agreement can also have clauses on specific factors based on unique business features. Addressing these elements and situations could require sound legal counsel.
Preparing for the business’s future
Creating and signing the partnership agreement is just the beginning. After doing so, partners must commit to their responsibilities and run the business together for who knows how long. Fortunately, partners can anticipate potential needs over time and revisit the agreement or make modifications if needed.