Business partnerships are often compared to marriages because when they are good they work very well. But when they self-destruct, just as in a marriage, the fallout can be devastating.
If you are contemplating entering into a business partnership, please consider including the elements listed below.
What contributions to the enterprise each will make
Ideally, you and your prospective business partner will have complementary skill sets that you bring to the business. For instance, if one partner is an extrovert who excels at sales and the other is a meticulous bean counter and numbers cruncher, you likely will stay in your own lanes and contribute equally but differently.
How decisions will be made
Every partnership needs a defined way to make decisions that affect the business, whether that has to do with hiring and termination practices or financial commitments. Otherwise, the environment could quickly devolve into chaos and toxicity.
How profits will be divided
Once you start turning a profit, how will the money be spent? Will you pay yourselves salaries, invest it back into the company, pay down debts? This all needs to be sorted out before ever hanging out your shingle.
How you can end the partnership
Nothing lasts forever, so have an exit strategy laid out that will be followed in the event of a partner’s death or departure. Include a divorce clause as well to avoid future problems.
Your partnership agreement should protect the partners and the business from legal liabilities. The best partnership agreements are drafted and/or reviewed by legal professionals who can assure that all contingencies are included and each point is addressed.