What Every Business Should Know
Before entering into a business partnership with anyone, several factors need to be considered in order for everyone's rights to be fully protected. Usually, when there is a misunderstanding in any area of the business, it is in the areas listed below. Therefore, when drafting your business partnership agreement, make sure to cover these specifications.
Detail what each partner will contribute to the partnership. Whether it's cash, property, or service contributions. Then list separately the stock percentage ownership between each partner.
- Allocation of Profits and Losses
Describe how profits and losses will be allocated. Will it be proportionate to each partner's interest in the business? Secondly, decide whether each partner will receive a draw, or a single pay-out of profits at the end of the year.
Will you grant binding authority to all partners, or only certain individuals? If this decision is not expressly stated, then any partner can bind the partnership without the consent of other partners.
- Decision-Making Authority
You should decide whether you would like certain partners to handle major decisions. Or, should all partners discuss them, and handle it together as a cohesive unit?
- Daily Business Operations
Decide who will keep the books, supervise employees, deal with customers, or negotiate with suppliers. Many of the major business operations should be explained here, so that everyone has a vital part to play in the success of the business.
Before adding new partners into the mix, there should be clear guidelines which detail the admission of each new partner.
Write out clear, concise, and defined rules explaining the procedure for a partner who leaves the business. In addition, explain whether there will be some sort of buyout plan listed in this agreement as well.
What happens if all partners cannot come to a complete agreement? How will it be handled? A description of dispute resolution should be included. Whether it is for attending something like a mediation, or arbitration meeting so that the dispute can get settled.