Whether you create a business partnership with another business owner, a friend, or a relative, it’s essential to set up a solid written business agreement before starting the partnership. This helps to make sure that you are on the same page with your partner about how the business will be operated and what the exit strategy will be. Having a written agreement to refer back to can also prevent misunderstanding and disputes. Here are 5 questions to address in a business partnership agreement.

How Will Work Be Divided Among the Partners?

Before working together with a partner, one of the most important questions to answer is how the work will be divided among the partners. Clearly establish the roles of each partner and the work that they will be doing. This helps to ensure that one partner will not end up doing most of the work. Consider the skills of each partner. Some of the work might even be rotated among the partners.

What Will Happen if a Partner Will No Longer Work?

There may be cases in which a partner can’t work any longer. For example, they may become injured or pass away. Consider how the business will continue to function in such cases. Create a buyout agreement to detail what will happen to the business and its ownership if one of the partners won’t work anymore. The agreement should also discuss what will happen if one of the partners chooses to leave the partnership. For example, if a partner leaves, how will they be compensated for their portion of the business?

How Will Money Be Handled in the Business?

Here are some things to consider for handling money in the business:

● What are the upfront financial contributions and property contributions of each partner?
● How will the business bank account be set up?
● What types of purchases need to be discussed with the partner?
● How will income be taken out of the business?
● How much will be spent on sales and marketing?
● How much profit will be put back into growing the business?
● Will an accountant be used in the partnership?

How Will You Sell the Business?

It’s important to plan an exit strategy in advance. Consider things such as how the value of the business will be evaluated and how profits and property will be divided among the partners.

How Will Conflicts be Handled?

In your business partnership agreement, detail how conflicts between partners will be handled.

There may be times when you cannot arrive at an agreement about something just by discussing it with your partner.

Before starting the partnership, it is a good idea to choose a mediator who can objectively look at both sides of a conflict and make recommendations from an unbiased point of view. As a coach, I can help you in this area. Get in touch today!