Entering a business partnership with someone can be a great way to move a company forward. Yet, whether you do it from the outset or once the business is up and running, one thing is crucial. You must create a solid partnership agreement.
Here are some of the things the agreement will need:
An outline of your respective duties
This can be challenging to define, especially if you are only just getting the business off the ground. Yet clearly defined roles reduce the chance that something slips through the gap between you. If you thought they were filing the tax return or applying for the necessary permit, but they thought you were doing it, the result could be costly.
Knowing you need to define roles also helps clarify what each person will bring to the table. When you put it down on paper, you might realize that the roles your partner can fulfill are so limited that you are better off staying solo.
An exit strategy
It might seem strange to think about this when you are only just starting, but it will prevent issues later. Do not expect your partnership to run forever. One of you may want to leave to do something different. Or you may reach the stage where your visions for the company are so different that separating is the only option.
Setting out how you will value the company if the remaining person has the first right to buy the other out and so on is crucial. It will be much more complicated if you try to do it at the time due to the emotion of the situation.
Partnership agreements are legally binding, so ensure you get appropriate help to create yours.