Starting a joint venture with a fellow entrepreneur is an exciting opportunity to achieve something great with your shared resources. There is always a cause for concern, though, as disputes can arise between even the most like-minded of partners.
Partnership agreements are among the most important business contracts for co-owners launching a company together. A well-written agreement can do much to preemptively mitigate the risks of a business dispute in the future.
Outlining rights and responsibilities
An effective partnership agreement is one that clearly describes the roles of each co-owner. Ambiguity in the wording of a contract can make it easy for one individual to overstep their bounds and cause a dramatic stir in the company. You and your partners should know your rights and responsibilities and act in good faith to protect them.
Establishing dispute resolution procedures
Because a dispute is liable to occur regardless of your preparations, it is best to define a resolution process within the partnership agreement itself. You might describe procedures for seeking impartial mediation to resolve the issue amicably outside of a courtroom. Consider preparing for a worst-case scenario by outlining terms for a peaceable exit or dissolution in case of a dispute that simply has no beneficial outcome.
Partnership agreements exist to protect the interests of each individual going into business together. They can only succeed at doing so by defining each person’s rights and providing solutions that will keep the company running smoothly regardless of a difference in opinions. When you are ready to kick off a new partnership, take every necessary precaution when drafting your partnership agreement.