When starting a business with a partner, it is crucial to have an agreement in place to outline each person`s responsibilities, ownership percentage, profit sharing, and dispute resolution procedures. This agreement, also known as a partnership agreement or a business partnership contract, should be carefully drafted to ensure that both parties are on the same page. Here is a sample agreement between partners in a business:
1. Name and Purpose of the Partnership
The name of the partnership, as well as its purpose, should be clearly stated in the agreement. For example, “The partnership between John Doe and Jane Smith shall be known as JD & JS, and its purpose is to provide consulting services in the field of digital marketing.”
2. Capital Contributions
Each partner`s initial contribution to the business should be listed in the agreement. This could include cash, equipment, or other assets. Additionally, it should be stated whether future contributions will be required and what will happen if one partner fails to meet their obligation.
3. Ownership Percentage
The agreement should outline each partner`s ownership percentage in the business, which determines how profits and losses are divided. For example, “John Doe shall hold a 60% ownership stake in the company, and Jane Smith shall hold the remaining 40%.”
4. Profits and Losses
The agreement should specify how profits and losses will be allocated to each partner, based on their ownership percentage. It is also recommended to include a clause on how distributions will be made and how often.
5. Management and Decision-Making
The partnership agreement should outline how decisions will be made, whether it is by unanimous vote, or if one partner will have more decision-making power than the other. It should also specify each partner`s responsibilities and duties within the company.
6. Dispute Resolution
In case of a disagreement or dispute between the partners, the agreement should specify the steps that should be taken to resolve it. This could include mediation or arbitration, and how the costs will be divided.
7. Termination of the Partnership
Lastly, the agreement should outline the circumstances under which the partnership can be terminated, including death, disability, or bankruptcy of one of the partners. It should also specify how the business assets will be distributed in the event of a dissolution.
In conclusion, a partnership agreement is an essential document that can help prevent misunderstandings and conflicts between business partners. It is important to carefully consider each clause and seek legal advice if needed. By creating a clear and concise partnership agreement, you can set your business up for success.