Conflicts among partners are almost inevitable due to the ups and downs of doing business. How your business deals with such disagreements may define its success or failure. Therefore, having a well-drafted partnership agreement is necessary for helping resolve any issues that may arise.
A business partnership agreement is a legally binding document that sets out the business operation rules as well as the obligations of each partner. It should be comprehensive enough to avoid any loose ends that may be a potential source of conflict. Below are some vital aspects of business that your partnership agreement should address.
Financial affairs
As with any other relationship, money is a leading cause of conflict among business partners. A partnership agreement should detail out how profits and losses will be shared among the partners. In addition, every partner’s contribution to the business and their percentage of ownership should be documented in the agreement.
Management of the business
Depending on the nature of your partnership, partners may have equal authority to make decisions or manage the affairs of the business. Whether or not this is the case, it is essential to include that information in your business agreement. It will ensure that there is no confusion or duplicity of roles and that no one oversteps their mandate.
The future of the business
As the business grows, existing partners may want out while new partners may want to join the business. It is worthwhile to have a well-documented way of implementing such significant changes to your business. In addition, the partnership agreement should have a clear dispute resolution plan that sets out how to resolve disagreements among partners.
A lot can change along the way. With that in mind, it is advisable to review your partnership agreement whenever necessary to adapt to the changing times. You can even include periodic reviews in the original contract. The most important thing is to have a well-crafted document that incorporates your fundamental intentions and fulfills your business goals and objectives.
