It can be thrilling to find someone who you think will make a great business partner. When you have a meeting of the minds and shared goals, anything seems possible.
However, the reality is that not every business partnership works out – and even the best ones can end because of death, disability or changes in a partner’s goals. That’s why you need a good partnership agreement to safeguard everybody’s interests.
What needs to go into your partnership agreement? Here are some suggestions:
Define each party’s responsibilities
A successful partnership thrives on clarity and transparency. Define each partner’s responsibilities and contributions so you can establish expectations from the outset. This section should outline each partner’s involvement in decision-making, day-to-day operations and financial contributions.
Dispute resolution mechanisms
Disagreements are inevitable in any partnership, but having a plan for resolving disputes can prevent them from escalating and destroying what you’ve built. Include a section outlining dispute resolution mechanisms, such as mediation or arbitration, so you have a structured and fair way to address conflicts when they eventually arise (and they will).
Intellectual property rights
Intellectual property is a valuable asset. Address ownership and usage rights for any intellectual property developed during the partnership. This includes patents, trademarks, copyrights and any proprietary information that may be crucial to the business. Include clauses that enforce confidentiality and non-disclosure agreements to safeguard proprietary business information, trade secrets and any other confidential data.
Exit strategies
Partnerships may evolve or face unforeseen challenges, making exit strategies a crucial element of any business partnership agreement. Clearly outline the procedures and conditions for partner exits, including buyout options, valuation methods, and non-compete clauses. Having a well-defined exit strategy can prevent complications and protect the business’s continuity.