Starting a new business is an exciting time for every entrepreneur. However, you and your business partner cannot foresee everything that will happen over the lifetime of your company. A partnership agreement can help ensure that the two of you are on the same page about running the business.
A business partnership agreement lays out the terms of your working arrangements. Business News Daily says that this document explains the responsibilities of each partner. One of you may specialize in marketing, for example, while the other may be a financial expert. The partnership agreement specifies which aspects of the company each of you will handle. Additionally, this document allows you to outline the kind of enterprises the business will engage in. As you put this document together, there are several elements you should include.
How will you receive compensation?
Nerd Wallet says that a clear partnership agreement establishes how you will receive your business income. Will you receive a share of the profits, and if so, what percentage will this be? Will you each receive fixed payments at certain intervals? Your agreement needs to clearly explain where your income comes from and when you will start receiving these payments.
How will you handle a change in partners?
One of you may decide to take your career in a different direction. Your partnership agreement can explain how you will handle someone’s departure. Will you buy the other person’s share in the company? You also have to consider what you will do if one partner passes away suddenly. How much investment in the company will the family retain?
Additionally, you may decide to bring on a new partner. Your agreement needs to consider how the two of you will decide on potential partners and what share this person will have in the company.
If you create a solid partnership agreement, you can ensure that you run your new business as peacefully as possible.