If you are starting a business partnership, it is important to get the paperwork in place in advance. You need an official partnership agreement. Starting a business together with a handshake deal is very risky and increases the odds of a future dispute.
There will be a multitude of factors to address in this partnership agreement, depending on the type of business you are starting, the geographic location and more. A cannabis dispensary in Colorado is going to have different areas to address than a bourbon distillery in Kentucky, for instance. But the following are three main areas that you want to make sure you address while drafting the paperwork.
1. Ownership percentages
To begin with, are you and your partner both going to have 50% ownership? Never assume you do. It needs to be defined in the agreement. After all, when selling the company or making future decisions, it makes a big difference if one partner has even 51% ownership.
2. Dispute resolution tactics
It’s also wise to remember that some disputes are going to happen. They may be minor, but they still need to be resolved. Are you going to vote on issues? If you still disagree, will you try mediation? Having a pre-determined set of steps to follow can help a dispute go smoothly.
3. Issues relating to finances
Finally, you need to clearly discuss the financial side of the business. Is there a certain amount of money you are both obligated to invest? When the business makes money, how do you split it up? Are you planning to pay yourself an hourly wage, a salary or just a percentage of the earnings?
Starting with these three areas can help you begin drafting a comprehensive business partnership agreement. With so much on the line, be sure you know what legal steps to take at this time.
