Here are important things to remember as you conceptualize and make your agreement.
•Put your agreement into written form immediately – it is essential that you put the in written form all agreements you and your partner have reached regarding responsibilities and rights in the business, as quickly as possible.
Not having a written document of your agreement may result to you being ill equipped in settling conflicts once they arise. Minor differences of opinion may turn into full-blown legal disputes.
Further, without a written agreement that says otherwise, the state laws that govern your business will have to control a lot of aspects about your business.
In this sense, you will be able to realize that having a written and ratified partnership agreement is a great help for your business.
-It enables you to build up and organize the relationship you and your partners would be sharing in such a way that would be favorable for the business.
-It gives you a chance to establish the shares in profits (even losses) that each or every partner may would take and the responsibilities of each partner.
-It clarifies issues on what direction the business would take when a partner absconds from his/her part in the business.
-It enables for other essential guidelines in the business to be imposed.
Here are the most important areas to include in the partnership agreement. Before putting the agreements in official writing, though make sure that you and your potential partner have considered these matters and discussed them carefully:
•Business partnership's name – depending on your agreement, you could use your combined names as official business partnership name or register the company with a fictitious business name.
•Contributions of each partner – it is significant that you and your partner establish and record each of your contributions for the business before opening it. Set the ownership percentage that each partner is obliged with.
•Profits, draws and losses allocated to each partner – establish the proportions allocated in a partner's percentage interest, other options like regular draws, frequency of distribution of profits, and other important matters.
•Authority of each partner – clearing up the issue of binding the partnership
•Decision – making in the partnership – the system you would implement so that each partner has equal share in the decision-making process of important matters in the business.
•Management duties – division of tasks between all the partners concerned
•Allowing new partners in the business – regarding business expansion and the procedure of allowing in new partners
•Withdrawal/retraction or death of a partner – make regulations in the proper handling of a withdrawing partner. Setting up a practical buyout scheme that can be offered for the other partners left behind.
•Resolving conflicts or disputes – setting up a way towards resolving disputes especially if there was a deadlock regarding certain issues
Consulting with a business lawyer can be a great help in creating and finally ratifying an effective partnership agreement.
