Are you thinking of starting a small business without a partnership agreement? Maybe it’s just you and a co-worker who plan to leave the company you work for and start a business of your own. Maybe you and a close friend or acquaintance have a business idea you want to put into action. It’s easy to assume that you don’t need any legally-binding agreements because you’re both on the same page.
The truth, though, is that it is wise to have an official partnership agreement. Here are a few reasons why:
The absence of an agreement can lead to litigation
If you have a disagreement about something major, like how to use company funds, you have to resolve it. The partnership agreement can help lay out how money should be used and how disputes should be settled. Without one, you may have to go to court and have a judge rule.
You need to anticipate all possible future problems
Even if you and your partner do not disagree on anything and always get along, you can’t predict every part of the future. What if you become ill or your partner passes away or one of you gets divorced? All of these things can impact your business, and it’s important to know where you stand.
An agreement can make it easier to maintain your roles
Don’t just rely on good intentions. The agreement can define your roles, duties, responsibilities, ownership percentages and things of this nature. It can therefore help you work together and avoid disputes entirely since you both know where you stand.
If you’re starting a business, be sure you know what steps to take and how to get the proper paperwork in place.