When starting a business most business owners either go for a single proprietorship or a partnership. A singe proprietorship means only one person is responsible for the business and all assets and liabilities are earmarked for him. A partnership, on the other hand, means that another person shares in the responsibilities of managing the business and also the cost of starting it up, in effect it ceases becoming a personal finance but a joint financing. A partnership is not just a business arrangement, even institutions who want to join forces to fulfill a common goal can forge a partnership.
Just like any arrangement, a partnership will only be truly effective if a written agreement or contract is put in place. IF you are planning to start a business with a partner and want tips on how to make a partnership agreement, read on:
• An agreement is at its most effective if it is put on paper. You may be a very principled person that can work on a gentleman’s agreement and handshake but just to be sure and to protect each other if any conflict arises, an arrangement that is on paper is the best insurance you can have. The agreement should detail the responsibilities of each partner and also identify their respective rights in the agreement. The agreement should also outline the policies of the partnership and how the business will be conducted going into the future.
• The agreement should specifically identify all of the parties involved in the partnership. Identify them by name and include their contact information. This is important because it will be an important piece of information in the event that something happens that needs legal intervention. In addition to this, also include the names of the representatives of each party and their designation. The witnesses to the agreement should also be included.
• Include the partnership’s name. This is quite important especially if a business partnership is being established. Just make sure that the business name has no similarities to other business names.
• Spell out the responsibilities that each party will assume. This should be as detailed as possible. Identify the level of work sharing required of both and even spell out the investment of each party. The power exerted by each party should also be identified and spelled out in the agreement.
• Just like the respective parties’ responsibilities. The benefits of the partnership should also be put on paper. Identify the benefits and how it is allocated. Even the scheduling and frequency of any profits or returns should be spelled out in the agreement.
• If there are any plans to expand the business or accept more partners, it should also be discussed in the partnership agreement. Additionally, it should also discuss the procedure if one of the partners decide to withdraw. Conflict resolution should also be discussed.
• Finally, have a lawyer draw up the agreement and review it.
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