During the business formation process, you and your business partner may want to draft an official partnership agreement. You may have started planning the company without any paperwork in place, and that may be fine. But once you’re ready to begin investing in building the company, you need to have some sort of agreement that defines your relationship.
But what should that agreement address? It will depend on the specifics of your situation, but a few examples are noted below.
How much of the business do you own?
To begin with, what is your ownership percentage in this new business? If it’s just you and one other partner, you may want to split things up evenly. But don’t just assume that this is the case. Ownership percentages are very important when selling the business or making key decisions.
What roles do you have at the company?
It may also be important to sit down and define your specific roles and the responsibilities that go along with them. This just helps the business run more smoothly, and it can also reduce the chances of a dispute in the future, because you both know what to expect.
How are you going to address the financial side?
Similarly, many disputes happen for financial reasons. This is why it’s wise to clearly define how much you need to invest in the company and how the money that the business generates should be used. Does it get reinvested in the business or should it be split between the two of you? How are you going to take wages from the business and what should be done with your earnings? Defining this in advance protects your interests.
Drafting a partnership agreement is just one step to take in forming a new business. It can help to have experienced legal guidance on your side.
