A partnership agreement can save your business a lot of trouble in the future. It can outline what duties you and your business partner have, what percentage of the business you own, how you’re supposed to make decisions or resolve disputes, what to do if someone wants to leave the business, and much more.
With all of these benefits, you may find yourself wondering why anyone would enter a business partnership without an agreement. Let’s take a look at a few of the reasons.
Their business partner is also a friend
When two friends enter into business together, one may worry that it is insulting to ask the other for a partnership agreement. After all, they’re friends and they will theoretically choose to get along and work together. Unfortunately, there are plenty of stories of friendships gone awry that end up in major lawsuits.
They think a handshake deal is enough
A handshake deal — or the equivalent — is sometimes used in place of a written agreement. Two people talk about their terms, come to an agreement and begin moving forward with the company. The issue is that a handshake deal can be hard to prove or enforce. It can also leave a lot of issues unclear when it comes to who is in charge of what part of the business, who has the final say when disputes happen and so on.
They think a crisis will never happen
Optimism is often helpful in the business world. However, being blindly optimistic and refusing or neglecting to take precautions just sets you up for failure when things do not go as predicted.
Getting an agreement in place for your business partnership is important
As you can see, it’s very important to have a proper agreement in place when you start a new business. If that’s where you’re at right now, make sure you are aware of the legal steps you’ll need to take.