Bringing partners into your business or collaborating with someone to start a company is not as easy as shaking hands over a cup of coffee. A partnership includes many legal complexities, and it is important that you and your partners understand what each expects of the others. This is why business advocates highly recommend having a solid partnership agreement that addresses these matters.
A partnership agreement should be as thorough as you can make it, including any contingencies you can think of from the start to the end of the business. Your business and your partnership have their own unique factors, so you will want your partnership agreement to reflect those elements with clarity and precision. Because of this, using an online template for your agreement may not provide the solid security you want for your business.
What should you include?
While you and your partners may hope to share the business equally, you may be unsure what this means until you discuss it as you draft your contract. Will all of you contribute the same amount of cash? Will you share the day-to-day responsibilities equally? These are only the beginning of the decisions to make long before you open your doors or launch your website. Some important factors your partnership agreement can address will answer these and other questions:
- How and when will you divide the profits?
- Who will have authority to sign contracts, hire employees and represent the company during legal dealings?
- Who will have financial power, such as signing checks and taking on debt?
- How will you resolve disputes that may arise during the life of the partnership?
- How and when will you end the partnership?
- What steps will you take if one partner becomes incapacitated, dies or decides to leave the business?
- Who will own the inventory, equipment and intellectual property when the business ends?
Difficult as it may be to project into the future to anticipate the kinds of situations that may arise as you work with your partners, it is important to have a plan in place for these and other contingencies. Otherwise, you may waste valuable time and resources trying to resolve common differences, which may damage the partnership too much for the business to continue.
An experienced Texas business attorney can guide you through the steps of creating a partnership agreement that will help you meet your goals for your business and protect your rights and interests along the way.