Entering into a business partnership can be very exciting, providing opportunities for growth and innovation. With that being said, partnerships may come with complexities and challenges as well. Therefore, it is important to consider implementing a partnership agreement contract before entering a partnership. This agreement will become the foundation of the relationship between the partners, outlining the roles and responsibilities of each individual.

Outsiders Law can help you to establish this partnership agreement contract or a business partnership agreement. Here are some compelling reasons as to why any business partnership should consider a partnership agreement.

1. Clear role of responsibility

A good partnership agreement explicitly defines what each partner is expected to do. This mutual understanding can effectively reduce conflicts and disagreements down the road. For example, clearly defining who does what part of the work can increase productivity and ensure everyone is happy with their role. This makes them individually responsible for their parts of the business, and reduces misunderstandings about who should be doing certain tasks.

2. Financial Contributions and Profit-Sharing Definition

The most contentious issue when it comes to partnerships is money matters. A comprehensive partnership agreement establishes clear financial contributions from each party to prevent unforeseen moments down the line. It should specify how much capital each partner is expected to commit as well as how that capital should be split in case of profits and losses. This will help to alleviate conflicts associated with financial expectations and navigate financial milestones in the business successfully.

3. Resolution of Conflicts

Conflicts are an inevitable part of any relationship. A Partnership Agreement Contract will significantly reduce the risk of disputes and will provide guidance in the event that a dispute does arise. The agreement may even detail resolution procedures, mediation or arbitration, and proceed to follow when one or more conflicts arise. Knowing that there is a method of solving disputes in advance may help partners approach conflicts constructively and maintain a healthier working relationship.

4. Exits and Dissolution of a Partnership

One would hope that any partnership could last forever, but sometimes things take a different turn. A Partnership Agreement should consider how partners can leave the business, whether that be for personal reasons or because they no longer align with the vision of the business. It should specify how a partner leaves the business, including how their share is valued, their options to purchase, and the division of assets. It is recommended that these terms are set out at the onset.

5. Intellectual Property Protection

In many creative industry joint ventures or even any technology-based partnerships, intellectual property is an important asset. The partnership agreement may indicate who owns rights to any intellectual property developed in the lifetime of that partnership. This would ensure there is no actual confusion concerning the rights and responsibilities related to intellectual property between partners, hence protecting business assets and avoiding legal disputes.

6. Identifying How to Decide

A partnership agreement should describe how decisions are to be made, whether by consensus, majority vote, or some other method. It can even detail which kinds of decisions demand unanimous consent. This helps partners move along in the decision-making process seamlessly and ensures that every voice is heard, creating a sense of cooperation and respect among partners.

7. Setting of Expectations Concerning Growth and Vision

A partnership agreement can provide partners with the chance to align their visions and expectations for the business. Working together to ensure all individuals are on the same page is an integral part of entering a partnership. You will want to discuss long-term goals and plans, as well as your strategies to get there. Having this laid out at the onset can effectively protect the future of the business.

Wrapping it up

A partnership agreement contract is not just a formality: it is an essential tool. Get in touch with Outsiders Law for assistance with your partnership agreement contract or a business partnership agreement.
For more info, visit: https://www.outsiders.law/practice-areas/business-partnership-agreement