The decision to go into business is a huge one on its own. This decision becomes even more important when you are going to partner with someone else. If you are planning on getting into a business partnership, it is important that you work out the terms of reference for your engagement.
A partnership agreement is crucial for the success of any engagement. Without one, you may not have the appropriate resources to settle disputes that may arise. Additionally, without a properly structured partnership agreement, Colorado law will control most aspects of your business.
Here are vital considerations you need to keep in mind when drafting your partnership agreement.
Partnership name
The first thing you need to do when getting into a partnership is to identify a name for your business. Before you get your paperwork complete, however, be sure to check that the name is not already registered to another entity.
Ownership structure
Next, you need to address the subject of business ownership. What percentage of the business will each partner have? Most often, this is determined by each party’s contribution to the business. Business ownership is also important because it forms the basis upon which profits and losses will be shared by the shareholders.
Decision-making powers
While there may be no direct formula for assigning decision-making powers to each party, you will ward off most conflicts if you address this from the onset of your partnership. For instance, one party may suggest a simple majority approval for every business decision. If all parties feel this is appropriate, then you should clearly capture it in the partnership agreement.
A partnership agreement allows business partners to structure their relationship in a manner that best suits their investment. Find out how a properly-written partnership agreement can help you grow your business.
