If you’re looking to go into a partnership then the first thing you should do is write up a Partnership Agreement.
Many people misconstrue these agreements as some form of malicious intent against the other parties and for this reason will not create one, but you honestly should always have some form of agreement written up which just outlines how the partnership is going to work.
There are many things to put into a Partnership Agreement however my top 3 points to include are:
1. How much money are you putting into the Partnership
2. What share of the profits are you going to take out of the Partnership?
3. What happens if one or more of the partners want to leave or what happens if the Partnership dissolves?
So they are the main points but allow me to explain each in more detail:
1. How much money are you putting into the agreement?
This simply needs to outline exactly what amount of money you are each putting into the business, also known as ‘Capital. It’s important to keep a note of this since memories can fade down the line and just having a simple paragraph written up as to who put in what can help when working out what share of a company someone owns.
2. What share of the profits are you going to take out of the partnership?
This can be a very broad section, for example are you actually going to take any profit in the first year? Or are you simply going to take profits that equal the amount of capital you put into the partnership and the rest of the profits are reinvested? Whichever way you choose of taking your profits, it must be stated clearly here as to what percentage each of you will take and whether that will be an annual, quarterly or monthly routine.
3. What happens if one or more of the partners want to leave or what happens if the partnership dissolves?
It’s horrible to think about at this early stage when you’re all ‘bright eyed and busy tailed’ but you must think about how the partnership will work if one or more partners wish to leave the partnership – how much of the company will they own? How much can they take of the companies earnings? And will the partnership still stand if certain members leave?
Also think about if you all decide to go your separate ways, then what? Again, will you each take a share of the company? Will you get the capital back that you put in during the start-up? Or would you like to set a time-frame in which partners don’t receive any payment should they leave within, say, 1 year of the business startup?
Each of these points can lead onto a load more and so on, but for me they are the 3 main topics to start with when thinking of what to put in your Partnership Agreement and from there you can branch out and begin to think of alternate ideas which link to these headings.
I hope that helps and if you want anymore information just contact me at firstname.lastname@example.org
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