A good partnership agreement is the base for an even better partnership
If you decide to enter a partnership, you will absolutely need a partnership agreement. You cannot just go without that. It is an agreement that states how the parties involved in the partnership must and must not behave so that the partnership is fruitful and can bring good results. How does that happen? Well, you become a partner with some purpose. You want to get something from the whole thing. So does your partner. Be sure to express that in the partnership agreement and be also sure that you both agree on that (that’s why it is called an agreement, after all). Once this is done, you are on the right track. It is often easier to negotiate the liabilities than the responsibilities and especially the duties. It is easier for people to describe the desired results, a bit harder to say who needs to do what and more difficult to say how things need to be done.
The main purpose of the partnership is to clarify what the parties are supposed to do so that their co-operation is viable. It can be very short (a few sentences) or more than hundred pages. It depends how much you want to get from the agreement. Is it an agreement for a single product, a whole line of products or co-operation in everything? For example, an airplane is made of many parts and it is practically impossible to be built by one single company. Even if it were, the cost would be so high that it would not make sense to be done that way. So what do airplane manufacturers do? They have partnership agreements with many smaller companies. For example, they have the plastic bags delivered, many metal parts done by other companies. Of course, the food you eat in the plane and the drinks you have are not produced by the airplane manufacturer – they are supplied by partners. Needless to say, the TVs you have installed were not produced by the manufacturer, either.
I have read about and even witnessed a few times verbal agreements where both parties trust each other so much that they are sure the other party will do the job if they say they would. These are also legal agreements – you do not need to have the longest, most sophisticated partnership agreement in the world to be effective. Partners just know what they want, that the other party can do it in a desired way and that sophisticated clauses will require paying lawyers. And these are the ones which normally work the best.
The partnership is like a marriage – you share the happy moments but you also experience the losses together. So if the business does not perform well, all partners will suffer eventually although one can be hit harder at the beginning. There is one better thing than in marriage though – you can quit the partnership agreement uk”>partnership agreement under different circumstances (described also in the agreement). If you a wondering what to include in it in order to protect yourself, you can get a partnership agreement template online, which also can be tailored to suit your needs by professional solicitors. Together with the partnership agreement, in some cases you might need a shareholdres agreement as well. That`s why, we advise to make yourself familiar with its main components.