Starting a business with a partner can be an exciting venture that leads to success.
However, you should establish a solid foundation for your partnership. One step in doing so is creating a partnership agreement in writing.
Clarify roles and responsibilities
As many as 80% of business partnerships fail within the first 2-3 years. You can avoid trouble with a partnership agreement that outlines each partner’s roles and responsibilities. This can help prevent misunderstandings or conflicts. The document keeps everyone on the same page from the start.
Protects your interests
A partnership agreement helps protect the interests of all parties involved. It can address important issues such as ownership percentages, profit-sharing arrangements and decision-making processes. Without a written agreement, discussions could lead to legal disputes and put the future of the business at risk.
Establish guidelines for decision-making
In any partnership, owners will need to make decisions regarding the direction and operation of the business. An agreement can establish guidelines for how the partners make these decisions. Having these guidelines in place can prevent conflicts from arising.
Provide a framework for resolving disputes
Even the strongest partnerships may encounter disputes along the way. A well-drafted agreement can help resolve these conflicts. By outlining procedures for mediation, arbitration or other dispute resolution methods, partners can address issues constructively and preserve their working relationship.
Facilitate business succession planning
If one partner decides to leave the business, a partnership agreement can provide guidance on how to handle their interests. Having these provisions in writing can help ensure a smooth transition and minimize disruptions to the business.
No matter how strong the relationship between business partners seems, you should always draft a partnership agreement before launching the business.
