5 Partnership Agreement Essentials
Businesses usually comprise of different structures such as sole proprietorship, partnership, corporation, and cooperative. Every business structure has their own set of challenges. Especially, business owners who start with partnership.In a business partnership, the partnership agreement is the cornerstone of the joint venture. It formalises everything you and your business partner decide for your business venture. However, there are a few essential clauses that you ought to include in your partnership agreement to ensure everything goes on smoothly. If need be take legal help to ensure you include these clauses in your partnership agreement.
Percentage of ownership
In every partnership, all the partners decide on how much they can contribute to the business. They fund all business equipment, office supplies, and the property for the business etc. Based on how much each partner contributes the percentage of ownership is divided between them. Your partnership agreement should include who owns what percentage of the company.
Division of work between partners
It is always recommended that you clearly delineate the responsibilities of each partner. You don’t want to face issues because one of the partners ends up overstepping into your responsibilities. It is, therefore, to pre-determine who will do what and how. Make it a point to get your lawyer to add this clause in your partnership agreement.
Definition of income
The whole point of getting into a partnership to do business is to make profits. But, the question is how will you and your partner draw income from these profits? Your partnership agreement should include how much money will each partner draw from the profits and what portion of it will be invested back into the business.
Plan of action in case a partner dies
Ideally, all partnership agreements include this clause. Decide with your partner what should be the course of action in case either of you die or withdraw from the partnership. If required, take legal help to determine the ideal course of action and include it in your partnership agreement.
Dispute resolution methodology
The most common problem in a partnership-based business is the arise of conflicts between partners. This mostly pertains to decision-making. The best way to deal with this is to be prepared early on. Figure out how you plan to resolve dispute with your partner. Consider having a mediation clause for the same. This way you will have a plan of action ready in the event of any conflict.These were some of the partnership agreement essentials that you need to keep in mind. Consult with our legal experts to know more about drafting a partnership agreement.