One of the most important legal documents you can have on file when starting a company is the partnership agreement. This document can help prevent a lot of disputes down the road if it has been written correctly and with both partners in mind.
So, how do you write a strong partnership agreement? This is an important question you must answer to avoid later disputes with your partner.
First and foremost, the agreement should begin with the name of the partnership. It can be a combination of the names of the partners or a name you create on your own, which would be a fictitious name. Before writing the agreement you need to make sure that the fictitious name you wish to use is not already in use by another company.
The agreement should clearly outline the contributions of every single partner in the business. This will get rid of any gray areas that could lead to disputes down the road. You can be as descriptive and in-depth as you feel necessary in this section.
The agreement must also define how the profits and losses of the business will be allocated. Does each partner have an equal stake in the business? Do two partners have higher stakes than a third? All of this must be outlined in the agreement.
Do you want one of the partners to refrain from making decisions about the business without consent from the other partners? If so, the partnership agreement is a great place to get this in writing.
The partnership agreement should be in writing. It should also be fair and equal for both partners or all partners involved. When you follow the tips outlined here today, your partnership agreement should be airtight and help prevent any disputes after your business formation.