Many business owners are preparing for future economic hurdles by establishing partnerships. A business partnership allows owners to organize the management of a business with a co-owner. A business co-owner could help improve the efficiency of a business while also saving on costs and liability issues.
Forming a business partnership agreement is often an essential step to securing a business’s success with the help of a co-owner. A partnership agreement is a legal document that establishes the responsibilities and expectations of each party. Before creating a partnership agreement, owners may want to learn how an agreement can avoid common issues and what should go into an agreement. Here is what you should know:
Common pitfalls avoided with business partnership agreements
Many issues can arise when establishing a business partnership without a clear agreement. These issues typically come from misguided expectations and communication differences, including the following:
- Financial disagreements
- Liability issues
- Trust issues
- Management conflicts
- Conflicting goals
- Unclear responsibilities
- Conflict of interest
Before agreeing to a business partnership, parties should discuss the terms of a partnership agreement. An agreement may need to include the following terms:
- Business ownership: How much each partner owns of a business and their liability expectations
- Financial expectations: How much each partner profits from a business, debt responsibilities and capital contributions
- Mission statement: The purpose of a business, future goals and steps to meet these goals
- Partnership length: When a partnership starts and the expected duration of the agreement
- Dispute resolution: Steps to resolve disagreements about management, ownership and other legal issues
Experienced legal guidance can help all parties to a business create a strong partnership agreement that will protect the business from legal issues in the future.