If you’re starting a business with someone else, don’t rush into it. Stop and take the time to draft a partnership agreement. Talk about what you both want and expect. Then sign the agreement so that there is never any confusion over where you stand.
Items in the agreement
Exactly what you put in that agreement is up to you, but common items often seek to avoid disputes by answering questions in advance. Some of the questions to address could be:
- What percentage of the business do you own? What percentage does your partner own?
- If you want to add a third partner, what is the process required to do it?
- If disputes start outside of the agreement, what resolution process should you use?
- How much money can each of you take in a weekly, monthly or yearly salary?
- If you or your partner want to leave the business, how do you go about doing it?
- If leaving means selling a percentage of the ownership, how do you pick the person to whom you’ll sell?
- Is this business agreement in place indefinitely, or do you want it to end at some point?
- What do you do if there is ever a conflict of interest?
- Who gets to make specific decisions? What duties and responsibilities do you have?
These questions can get you started, and you’re sure to uncover more important areas as you go. Next, take the time to learn how to draft a legally binding agreement.