If you plan on going into a small business with a business partner, then creating a small business partnership agreement is essential. The business partnership contract will avoid conflicts and minor misunderstandings between you and your partner. Besides, without a business partnership agreement, your State's law will control many aspects of your small business.
What Is a Small Business Partnership Agreement?
A small business partnership agreement is a legally binding document between two or more business partners that outlines business operations, financials, stake, capital contribution, and decision making. Also, the agreement spells out the process for one business partner to sell or leave the company and how the remaining partner split losses or profits.
The business partnership contract clearly establishes rules for every business operation and role of the partner. When two or more people own a company's share, creating a business partnership agreement could provide critical guidance in more difficult times.
Benefits of Using a Small Business Partnership Agreement
A small business partnership agreement is mandatory because it establishes a set of agreed-upon processes and rules that the stake owners sign and acknowledge before the problems arise. The agreement spells out how to address the controversies and challenges when they arise.
The business partnership agreement clarifies the roles and sets out these roles by listing each partner's position and duties to the arrangement. The contract reduces money-related disputes by outlining the financial contributions and entitlements of each owner to the business. In addition, the business partnership agreements outline each entry and exit plan in the business partnership.
The agreement establishes each and every step in the decision-making process of business. Therefore, the outline of these processes reduces most disputes between the partners over a partnership's authority before they arise.
What Terms Should be Included in a Small Business Partnership Agreement?
A small business partnership agreement is broad and should touch every aspect of a business partnership from the start to end. It is significant to include all the foreseeable issues that could erupt regarding the co-management of the business. Here are the terms to include in a small business partnership agreement.
Ownership stake: A small business partnership agreement clearly outlines who owns how much percentage or share of the business, making each partner's stake in the business crystal clear.
Business operations: The contract should explain the engaging business activities and the activities they will not.
Decision-making: The small business partnership agreement should spell out how decisions are made and each partner's responsibility in the decision-making process. The contract includes who has financial control of the business and who must approve the addition of new partners.
In addition, it must include information on how losses and profits are distributed amongst the partners.
Liability: The agreement should be paired with other legal documents to fully protect the partners from liability
Dispute resolution: Any business partnership contract should include a dispute resolution process.
Business dissolution: The small business partnership agreement should outline how the dissolution process should occur.
However, specific files may ask for the expertise and in-depth understanding; Cocodoc provides you a sample business partnership agreement to make the process easy and simple. Download the business partnership agreement template free from Cocodoc.