By: Palm Beach State College Small Business Development Center
BOCA RATON — Are you thinking about starting a business with a partner? Whether it’s a family member, business associate or friend, you need to realize it is a relationship. And like all relationships, business partnerships will have their share of ups and downs.
Partnership Agreements are a must when it comes to protecting yourself and your business.
Here is a list to start with, but be sure to consult with a professional, such as a lawyer, for more detailed information specific to your individual business needs.
Percentage of Ownership. You should have a record of how much each partner is contributing to the partnership prior to its opening. Typically, these contributions are used as the basis for the ownership percentage, but this is not a cut and dry formula. It’s entirely up to the agreement.
Allocation of Profits and Losses. Will profits and losses be allocated in proportion to a partner’s ownership interest? Also, will partners be permitted to take draws? Make these decisions in advance.
Who Can Bind the Partnership? Clarify what consent is needed before a partner can enter into an agreement that obligates the business.
Define the Decision Making Process. You don’t want a stalemate interfering with business success.
Buy Sell Agreement. What happens if a partner dies or just wants out of the company? Establish a method by which the partnership interest can be valued and the interest purchased either by the partnership or individual partners.
Resolving Disputes. Include a mediation clause in your partnership agreement to provide a procedure by which you can resolve major conflicts and avoid court battles.
Source: SBA.gov
These are just a few key points to include in a Partnership Agreement and are not intended to be taken as legal advice. Contact an attorney or your personal advisor regarding your Partnership Agreement.
For more on this topic, or for no-cost consulting with certified business analysts, including growth acceleration consultants and PTAC Specialists, contact the SBDC at 561-862-4726 or email us at sbdc@palmbeachstate.edu