Writing a Business Partnership Agreement

Introduction

• Starting a business with a partner can be exciting but risky without proper rules.
• A common mistake is not having a proper agreement, leading to misunderstandings and conflicts.

Step 1: Key Elements to Include

• Define the nature of the partnership:
  • Business name and purpose.
  • Roles and responsibilities of each partner.
• Outline financial contributions and profit/loss sharing:
  • Clarity on each partner's financial input (cash, property, services).
  • Detail on profit and loss distribution (equally or based on contributions).

Step 2: Financial Contributions and Profit Sharing

• Specify financial contributions of partners.
• Detail profit/loss sharing method:
  • Equal distribution vs. based on investment/contributions.

Step 3: Roles, Responsibilities, and Expectations

• Clearly define roles to avoid conflicts:
  • Day-to-day management.
  • Financial management.
  • Specific areas such as marketing or product development.

Step 4: Establishing Decision-Making Processes

• Define how decisions will be made:
  • Consensus or certain partners with more power?
• Specify areas needing unanimous agreement:
  • Major changes, borrowing, selling the business.
• Address voting rights and tie-breaking protocols.

Step 5: Planning for the Future

• Include entry and exit clauses:
  • How new partners join.
  • Process for partners leaving, valuation of shares, transfer of ownership.
• Plan for partner's death or disability to ensure business continuity.

Step 6: Dispute Resolution Mechanisms

• Outline dispute resolution steps:
  • Mediation or arbitration before legal action.
  • Specify jurisdiction laws governing the agreement.

Step 7: Ensuring Legal Compliance and Regular Reviews

• Consult legal professionals during drafting.
• Ensure clauses are enforceable.
• Periodically review and update the agreement based on changes in business or partnership dynamics.