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What to discuss in a business partnership agreement

On Behalf of | Sep 28, 2023 | Business |

One of the most important things that business partners can do is to create an official partnership agreement when they start their company. It’s often tempting to skip this step. Business partners may be close friends or even family members, and they trust each other. But it’s still important to create the agreement to help prevent disputes and protect the company.

But what should be discussed in that partnership agreement? If you have never made one before, here are three areas to consider.

1. Ownership percentages

Often, a partnership agreement will start by specifying what percent of the business each person owns. Even if that business is going to be split 50-50, so that both people have to work together to make decisions, this should still be specified in the agreement and not assumed.

2. Roles and responsibilities

Additionally, the agreement can note what roles each person will have within the business and what they are responsible for. This ensures that each business partner can trust the other to take care of these specific responsibilities. It also helps to prevent disputes and disagreements because the roles are clearly defined.

3. Financial considerations

Finally, anything financial should be discussed in advance. How will each business partner be paid? Are they expected to invest money in the business? How much money gets reinvested in the business, as opposed to the money that the partners take out as income?

These are not all of the areas that a partnership agreement should touch on, but they can help get the process started. Business partners need to carefully consider all of their legal options when setting up their new company.