Are you thinking of setting up a partnership business with a friend? If you are, that's a great idea. Firms with a partnership set up where two or more people own or run them have some obvious benefits. First, the company benefits from the knowledge pool, resources, and skills of the partners.
Secondly, the business shares both profit and losses, thus reducing the burden on each partner. However, it is recommended to have a partnership agreement in place for such a set up to avoid conflict, or better still have a common ground of settlement should they arise in the future.
A partnership set up is similar to a sole proprietorship, where each partner owns a portion of assets belonging to the organization and its liabilities. Since more than one person makes business decisions that affect the business, it is critical to address the aspects of running the business upfront.
You should have a small business partnership agreement PDF that defines business ownership and, consequently, the partners' responsibilities. Generally, the clearer and detailed the agreement, the fewer partners have to debate about or disagree upon when they don't see eye to eye.
Two or more people intending to run a small profit-oriented business together need a partnership agreement. This includes friends, family members (spouses), and colleagues.
A small business partnership agreement PDF is a contract between the parties involved in a business, and it establishes responsibilities, profit, and loss distribution for each party. It may also include capital contribution information, withdrawal, and financial reporting.
Below are critical information that should be addressed in any small partnership agreement.
The name of the partnership business is one of the most critical information an agreement must not miss. It may be chosen based on the names of the partners but must be unique to that business alone.
Here is a crucial part of the small business partnership agreement PDF; it addresses the contribution made by each partner. You must decide beforehand the amount a party would contribute in cash, properties, or service to the business. Not only that, but the agreement may also specify the support, time, effort, and commitment required from each party. Besides, you may also define what contribution is expected of each partner in the future.
You are all in business with the hope of making a profit. Right? So, your small business partnership agreement PDF should include a profit-sharing formula and percentage of ownership for each partner. You may also include non-partner employees' information who may contribute relevant skills to the business operation in exchange for compensation.
A partnership business set up should be concerned about tax remittance to the government. Filing and payment of tax become easy and stress-free when the agreement defines the partner responsible.
It may not be easy to spell out every detail regarding roles in a small business partnership agreement PDF. However, the document should dictate the person responsible for essential activities such as accounting information, bookkeeping, cooperating minutes, negotiating with customers, and employee supervision.
You and your partner(s) will not have the same view on every matter; hence, setting up a decision structure is important. What type of decision can be made by a single partner? And which requires a unanimous vote from partners?
No one enters a partnership with the hope of seeing things get ugly. But your small business partnership agreement PDF must state how to dispute will be handled if the relationship gets sour in the way.
The unexpected sometimes happens in business; no one calls for it. That's part of things that makes business both unnerving and exciting. Your agreement should address the following possible partnership questions/scenario: