You may have decided that going into business will carry less risk if you bring in a partner to co-own the business with you. Business partners can offer a number of benefits like expertise or financing. However, if your partnership agreement fails to address key issues that may come up in the future, your business venture may collapse.
Your partnership agreement is a good place to address anything that is bound to cause conflict during the course of your business operation. Do not assume that you and your partner will always be on the same page. Forbes details some areas that partnership agreements should deal with.
Detailing contributions and distributions
Business partners should know the duties and resources they should contribute to the operation. Explain in the agreement which partner contributes financially if only one of you is going to invest any money in the operation. Your agreement should also determine how much you and your partner will receive in payment as well as who gets compensation first if your company has an order of payment.
Designating who makes decisions
You cannot count on agreeing with your partner on every business decision. If you and your partner have a deadlock, a specific partner needs the authority to make the crucial decision to move forward or not. A business partnership should designate someone with decision making power or set up a voting system if the business consists of multiple partners.
How to resolve disputes
Some business partnerships devolve into intense or even bitter conflict. Consider how you would want to resolve a dispute with your partner. You do not have to go to court right off the bat. You could include mediation or arbitration clauses in your agreement. Avoiding a lawsuit may reduce costs and also keep information about your business out of the public record.
Changes in ownership
At some point, you or your partner may want to leave the business. Your agreement should describe the process for you or your partner to sell off your ownership interest. Also describe what will happen in the event a partner suffers bankruptcy, decides to retire, dies, or becomes incapacitated. In addition, you might put in a non-compete clause in the event your partner wants to set up a new business that might compete with yours after leaving.