A strong partnership is one governed by a comprehensive partnership agreement. A partnership agreement defines the expectations for both parties as well as establishes guidelines and requirements for operation and potential challenges.
When you are considering a partnership, make sure that your agreement covers the critical elements.
Company outline
A comprehensive partnership agreement starts with an outline of the company, including the partners and their titles, the target market and the operating details. Include specific information about the company name and the areas where the business will operate as well.
Partner responsibilities
Every partnership agreement defines the responsibilities of each partner so that both parties know what to expect from the operation. For example, one partner may be more experienced with inventory management while the other partner might have accounting skills. Another important element to consider is prioritizing the right of first refusal. If either party wishes to sell their interest in the business, the other partner must have the option to buy them out before they explore other avenues.
Dispute resolution
When partners can not agree, the partnership agreement should include dispute resolution methods. Whether you require mediation or implement a means to make disputed decisions, define the way that these disagreements reach a settlement to avoid hostility and confusion.
A partnership agreement is a governing document for any partnership business. The more comprehensive your agreement, the more effective it is at eliminating uncertainties. Be proactive about drafting your partnership agreement so that both parties clearly understand their roles, responsibilities and expectations.
