Disputes and litigation can sometimes arise between business partners. This can be stressful, time-consuming and expensive. It can also significantly hinder the business’s operations, sometimes causing the partners to split up.
In order to avoid these complications, it can be helpful to use a business partnership agreement. This allows business partners to address key areas in advance so that they do not lead to disputes later. Below are a few things that this partnership agreement may need to cover.
1. Financial division
First of all, money is a very common cause of dispute. It could be that one person believes they have invested far more into the company than the other, or there could be inequality issues with how the company’s earnings are being divided between business partners.
2. Ownership percentages
Similarly, business partners need to know exactly what percentage of the company they own. If one person owns more than 50%, that can dramatically change things when selling the company or when making significant decisions on the company’s behalf.
3. Exiting the partnership
The partnership agreement should also discuss how one person can go about leaving if they choose to do so. Do they need to give advance notice? What is the process for bringing on another business partner?
4. Duties and responsibilities
Finally, the partnership agreement should clearly define the roles that each business partner will have at the company. When the duties and responsibilities are clearly spelled out, it helps to avoid conflicts over who gets to make certain decisions or who is in charge of specific operations at the business.
Drafting a business partnership agreement is important, as is understanding what legal options you have to work through dispute resolution.