A business partnership allows multiple parties the right to dictate how a business is run. The terms of a partnership can be outlined in an agreement. An agreement typically intends to reduce disputes and conflicts by setting clear goals and expectations.
Before a partnership agreement is drafted, it is often important to understand what terms should be considered. Here is what you should know:
What is the role of each partner?
A partnership agreement can define the roles and responsibilities of each partner. This includes day-to-day responsibilities and long-term goals. For example, one partner may be responsible for business management while another focuses on establishing professional relationships with vendors, members and other businesses.
How much of a business does each partner own?
A partnership agreement can establish how much of a business each party owns. The percentage of ownership can define how much each party is required to contribute to a business and how much control they have over important decisions.
What are the profits and losses of each partner?
Partners can discuss how much each party gains and losses from a partnership agreement. In some agreements, partners may have an equal share of profits. The amount each party gains or losses could be established with the amount of ownership of a business.
Why would a partnership be terminated?
To protect the interests of a business and its partners, a partnership agreement may outline how an agreement would end. For example, the partnership may dissolve at a set date. However, there may be a termination clause if a partnership leads to a dispute and parties wish to end an agreement.
Legal guidance can help business partnerships draft an agreement that protects the rights of each party.