If you`re starting a business with a partner, one of the first things you`ll need to do is draw up a partnership deed or agreement. This legal document outlines the terms of your partnership, including each partner`s contributions, responsibilities, and rights. While it may seem like a tedious task, having a well-written partnership deed in place can protect you and your partner from potential conflicts down the line.
Here are some key points to consider when drafting your partnership deed:
1. Define the type of partnership: There are several types of partnerships, including general partnerships, limited partnerships, and limited liability partnerships. Each has its own set of legal requirements and liabilities, so it`s important to determine which type of partnership is right for you.
2. Identify each partner`s responsibilities: Outline each partner`s role in the business, including their specific duties and contributions. This helps prevent misunderstandings and ensures that everyone is on the same page from the start.
3. Determine profit and loss sharing: Specify how profits and losses will be divided between partners. This can be based on each partner`s investment or contribution to the business, or another agreed-upon formula.
4. Decide on decision-making procedures: Determine how major decisions will be made, such as hiring new employees or entering into contracts. This can include a voting system or require unanimous agreement between partners.
5. Address dispute resolution: No partnership is perfect, so it`s important to have a plan in place for how disputes will be resolved. This can include mediation, arbitration, or going to court if necessary.
6. Include exit strategies: While you may hope that your partnership will last forever, it`s important to plan for the possibility of one partner leaving the business. This can include options for buying out their share of the business, or selling the entire business if necessary.
Overall, a well-crafted partnership deed can provide clarity and peace of mind for both partners. It ensures that all parties are on the same page and can help prevent potential conflicts down the line. While it may seem daunting, working with a legal professional to draft your partnership deed is well worth the investment in the long run.
