When you start a business with someone else, you may be tempted not to get an official partnership agreement in place. After all, you know this person and you are comfortable working together. The two of you may be friends, family members or coworkers, so you are just counting on the existing relationship being enough.
However, this is a risk. Partnership agreements are important, and there are some key reasons to use one, even if you think things will go smoothly.
Avoiding disputes
One of the biggest reasons to do this is simply that your partnership agreement can help you avoid disputes. It can define your roles within the company or specify how financial earnings should be divided between the two of you. These are areas where partners will sometimes clash, but talking about them in advance and using the partnership agreement to lay out the framework means that you both know what to expect. Additionally, you can use your partnership agreement to set up dispute resolution tactics in case the two of you do not agree in other areas.
Addressing future changes
Additionally, you may want to use this agreement to address how things could change for the business in the future. It may not always be as simple as the two of you working together. What if you want to bring on another business partner? What if your current partner wants to leave? What happens to their ownership percentage if they die? These are all important questions to ask and address upfront.
As you work to start your business, be well aware of the paperwork that you’ll need and the legal steps to take at this time.
