When you start a business, you are investing in your future. It likely is the biggest financial decision of your professional life. You will feel the impact, bad or good, for decades.
When you go into business with a partner, your life becomes even more complex. Your success may depend on the strength of creating a comprehensive partnership agreement.
What is a partnership agreement?
An agreement sets the ground rules for the relationship between you and your partner. To be effective for both sides, the document is as thorough as possible. The last thing you want is to overlook an important detail that causes problems later.
Some of the obvious issues concern day-to-day operations. The agreement specifies the rights and duties of partners and standards of conduct. It even details vacation, sick leave and absentee policies.
The agreement also governs long-term issues that you are not thinking about now. These include the transferring of shares and procedures for when a partner leaves.
What else should an agreement include?
Every business is different. Even so, partnership agreements include boilerplate concepts that apply to all businesses. Some are simple, like naming the business, establishing a main office and other basics.
Other terms of the agreement state partner financial, intellectual and service responsibilities. Clauses also protect your company, covering noncompetition, nondisclosure, arbitration and mediation.
Every business will have its ups and downs. It is no secret that planning every detail of your partnership is the place to start. A solid foundation is essential to a successful outcome.
What does a partnership agreement mean to your future?
You may go into business with either a friend or a total stranger. In either case, how well do you know them? How will they react in pressure situations? How will you resolve conflicts between you and your partner?
Operating a business is complex. When it involves a partner, you need strong rules that shape and guide your strategy.