Business partners can complement each other’s skills and contributions. They share the burdens that come with the development of a new organization and the profits when the company is successful.
Those contemplating a new business partnership likely need to negotiate a written agreement for their protection and the protection of the company that they intend to start.
What is a partnership agreement?
A partnership agreement is a contract between the partners discussing their intentions and expectations. Each partner may need to go into great detail regarding what they intend to provide for the company and what type of work they expect to perform. They can also clarify the compensation that they should receive for their services and how they intend to share in the profits if the company succeeds.
Additionally, these contracts can help prevent conflict or may make it easier for partners to resolve disputes. Partnership agreements may include restrictive covenants that protect trade secrets and prevent unfair competition. They may include agreements about a buyout in the future if one partner wants to leave the company or acquire the other’s interest in the business.
They may even include conflict resolution clauses incentivizing mediation and other solutions over litigation. The terms of a partnership agreement can help reduce the likelihood of major conflict and may guide the future relationship between the partners, as well as the growth of the company.
Acquiring appropriate guidance when negotiating and reviewing a partnership agreement can help those planning to start businesses protect themselves. The right documents are critical for liability mitigation and the minimization of future conflict.