Setting up a business in partnership with another person or in a group can appear like a great idea which can also save a lot of hassle. If you were setting up a limited company for example you would need to pay fee and deal with complex administration which is not the case when setting up a business partnership. However, things are rarely so easy and whilst you may have a strong friendship or working relationship with you partner/s at when you set the business up, this could all change.
It is crucial to protect your business interest s and you do not want to cut any corners (by not setting a business partnership agreement from the outset for example) because you may regret this later. The story often goes something like this: you started trading and everything was going well until some difficult decisions needed to be made. You and your partners had different ideas on how to go about things and the time spent debating what to do resulted in a missed opportunity. This created tension and arguments and it quickly became apparent that some people were not pulling their weight. All of sudden it appeared grossly unfair that profits were shared equally between partners.
Why a business partnership agreement is worthwhile
Quite simply, you can save yourself a lot of stress and hassle by instructing an experienced business solicitor to draft a business partnership agreement from the very start. This will not only help you at the beginning but will ensure that your interests are safeguarded for the lifetime of the partnership. With such a partnership in place everyone will understand their roles and position within the company. You will end up with an agreement perfectly suited to the needs of your business.
A good partnership agreement will cover everything listed below:
• Exactly who is involved in the partnership and what their roles, rights and responsibilities are
• What he business partnership will be named and where the premised will be
• A glossary of terms so that the agreement can be easily understood
• How the decision making procedure works
• Financial contributions: how will assets and liabilities be distributed between partners? Who will deal with the insurance, banking and accounts for example?
• What happens should someone retire, die or be forced to leave the partnership? Gan a partner or outgoing partner be bought of their share
The business partnership may well grow very quickly to start with which can lead the asset/liability state of affairs to change very unpredictably. By having a partnership agreement set up early on, you can ensure that everyone is focused on the job in hand rather than the state of the finances.
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