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Key clauses in partnership agreements

If you are going into business with someone, you need to formally document this relationship. This applies whether they are a relative stranger, a close friend or a spouse. It can prevent problems that lead to the demise of your relationship and also protect your business in the case of personal problems between you such as divorce.

Here are some of the clauses you should include:

Who owns what

Maybe you had the initial idea for the business and the other party came in with some critical input. Neither could have done this alone, but just how much did each person contribute? It does not actually matter that much, and you can also base business interest on other factors such as how much finance each party provided. What is essential is that you agree on a percentage that each partner will own and move forward based on that.

How you will split profits and losses

You could relate this to the ownership percentages or to other things such as contributions going forward. Once again what matters is reaching an agreement and documenting it.

How you will resolve disagreements

You are unlikely to agree on everything, however well you get on right now. Planning for stalemates is crucial and it is far better to do this now with a cool head than when tensions have escalated because you cannot reach consensus.

How you can end the partnership

There may come a day when one of you wants out. It could be because of disagreement, ill health or simply the desire to move on. Determining whether the other party has the first right of refusal and how you set a price are just two of the things you should stipulate from the outset.

As you can see, there’s a lot to consider when making a partnership agreement so consider legal help to create it.