A business partnership can be an excellent option for a couple of people who want to pursue the same entrepreneurial concept. It may not require as much written planning as a corporation or leave you with as much personal liability as a sole proprietorship would.
Whether you have worked with your business partner before or met them through an acquaintance, you probably feel eager to start your company together. Before you invest any money or take official business formation steps, you and your partner must sit down to create a written agreement about your relationship.
Why is a partnership agreement so important?
Human relationships go through ups and downs. When you first meet your business partner or start discussing your business concept, the two of you will be in a honeymoon phase where you both feel excited and positive about one another.
After years of working together, the way you relate to one another may change. Disputes are even more likely to arise if the two of you don’t agree about long-term goals for the business or each of your individual responsibilities to the company.
A business partnership agreement can address everything from long-term goals and benchmarks for success to the contributions and expectations of each partner. How much each of you will invest and earn, when you might buy each other out or even how you will resolve future disagreements can all be part of your contract. The more detailed you are, the more prepared you will be for various challenged in the future.
Thinking now about the issues your partnership may undergo in the future and addressing those issues in a written agreement will reduce the likelihood of those conflicts negatively affecting your business.