If you’re starting a new business with a business partner, it is wise to create an official partnership agreement. Many people skip this step. Sometimes they just want to move quickly and they don’t worry about it. Other times, they feel odd asking someone who they consider a friend to sign a legal agreement.
However, this is a very important step to take. It can protect you and your company. Some things that the partnership agreement can touch on include:
- What percentage of the business you both own
- What duties you are each expected to carry out
- What financial obligations you each have, such as how much money you will each invest
- How long the partnership is going to last
- What you need to do to resolve a dispute
- What you need to do to end the partnership
- How either one of you can buy out the other and control the entire business
- What steps you are each allowed to take, such as hiring and firing employees, choosing contractors, working with other companies, etc.
- What to do if you consider adding a third partner in the future
Essentially, the agreement is just a way to take on some of these legal issues upfront. It ensures that you are both on the same page and that you understand your rights and obligations. It gives you a document to refer to if you ever wind up in a serious dispute or disagreement. It’s a crucial part of business formation in the United States, and you need to make sure you know exactly what steps to take.
