Entering a partnership can be an exciting step toward making business dreams come true for Indiana entrepreneurs, but partnerships can be a nightmare when things don’t work out. Therefore, you need a well-written partnership agreement. There are several things that the agreement should contain.
Before ironing out a partnership agreement following business law best practices, each party should inventory their property. The inventory should include physical and intellectual property. Then, the two parties must agree on what happens if the mutual business improves the property.
The next step is to define the partnership’s goals. While working through this process, everyone must be up-front about their personal goals. Open communication at this point often helps everyone understand if they are willing to work towards an expected outcome. If not, now may be a great time to walk away and still be friends.
Percentage of ownership
One of the details to be worked out is what each person puts into the partnership to make it successful. This can include physical and intellectual property, time spent conducting business and other things. Then, the partners must agree on what percentage of the company each will own.
Often, when partnerships are unsuccessful, it is because they have not agreed on a decision-making process. Partners need to decide on a series of checks and balances to ensure each party stays honest with the others.
Dissolving the partnership
There are many reasons that partnerships may only last for a while. Therefore, you must agree on how to end the partnership if things do not work out. In particular, the agreement should include details about what happens to the business if a partner dies.
Crafting detailed, specific partnership agreements before companies are formed or start engaging in business together can set the business up for success. Life is full of surprises, so there’s no such thing as being overprepared.