When two or more people decide they want to go into business together, it is often agreed to form a business partnership. If you are starting a business with family or friends, or are looking for partners to help you run the business, forming a Legal Business Partnership is not something be taken lightly. A partnership is a legally recognized business entity that can exist between many different people. When these people want to get together and form a business entity, they can draft a partnership-agreement.html”>Legal Partnership Agreement and decide what rules they wish to work under. Here is what you need to know before you start:
- HOW DO I START A LEGAL BUSINESS PARTNERSHIP? Forming a partnership is done verbally or in writing. Because a partnership is a legally recognized business entity that applies certain rules, duties and obligations to its members, you should always be sure of the people you choose to form the Partnership with. It’s one thing to be friends with a person. It’s a completely different matter to form a business partnership with them and go about making money.
- WHAT DOES A BUSINESS PARTNERSHIP DO? Put simply, a partnership is an agreement between 2 or more people who want to go into business for profit. If you enter an agreement with another person to do business and make money, you may automatically have formed a partnership without you knowing it. Whenever you want to make money with other people, you should first lay out the terms and conditions of the Business Partnership Agreement in writing. You don’t want an assumption that went unsaid to come back and haunt you later.
- CAN BUSINESS PARTNERS DECIDE WHAT THEIR OBLIGATIONS ARE? Yes and no. Although there is much room to move when drafting Partnership Agreements, some things are pre determined by law. Business Partners can agree to share or assign responsibilities and agree how they will share profits and losses, etc.
- WHAT DOES A LEGAL PARTNERSHIP AGREEMENT NEED TO INCLUDE? Creating a Partnership Agreement is the most important step you’ll take when entering any business partnership. You will need to make sure you have as much information in the agreement as possible so no-one is left wondering what their responsibilities are. Partnership Agreements need to state the intent for which they are formed, the name of the business, the length the Partnership is proposed to last, and much more.
- WHAT IF YOU WANT TO LEAVE THE PARTNERSHIP? Your Partnership Contract should cover all eventualities, particularly what will happen if one or more people want to get out of the business. If you’ve entered a Partnership Agreement with other people who want to sell the business or shut it down, but you want to keep going, your Partnership Agreement has to be clear about how to continue. Partnerships often have partners who differ in their interests and wishes. And nothing causes more problems than a Partnership Agreement that is silent about how to handle these differing wishes.
Starting a new business can be a fun and exciting time. It can also be an anxious and difficult time. If you have made the decision to be business partners with other people, you owe it to yourselves to make your partnership-agreement.html”>Legal Partnership Agreement as accurate and clear as possible. Partners have to be able to rely on one another. They also need to understand how the business is meant to work. Leaving a Partnership Agreement silent on an important matter is the most guaranteed way to see your partnership fail and end in less than happy circumstances.