If you are thinking of going into business with someone else and becoming partners, it may be tempting to just have a handshake deal. The other party could be a family member or a close friend, someone you trust. You may not think there is any need for formal contracts.
But the truth is that business partnership agreements can still be very useful. They help protect your investment and your business interests. Here are three areas they can address.
How you get paid
First of all, the agreement can set up payment structures. Are you and your partner simply going to split the revenue that the business brings in? Are you going to receive a set salary and invest everything else back into the company? There are many options, but you need to know exactly how you are going to earn money.
Your roles and responsibilities
Next, it is often best to define roles and responsibilities in a business partnership, as it can reduce conflicts. If neither of you has a job description, you may end up stepping on each other’s toes or running into disputes when you both want to make the same decisions.
Your ownership percentages
Finally, your business partnership may give you 50% ownership in the company, but do not assume that is the case. Ownership percentages are very important when making business decisions or if you want to sell the company. The business partnership agreement can clearly spell out what percentage each of you will own.
These are certainly not all of the areas that the agreement can touch on, so take the time to look into your legal options while setting everything up.
