Many business executives agree that entering into a business partnership can make the difference between a successful company and one doomed to disagreements. A successful partnership depends upon many factors.
One of the most critical factors is the quality of the partnership contract.
Tips for creating a partnership agreement
The U.S. Chamber of Commerce cites a number of benefits of structuring an agreement as a general partnership. This is the most common form of partnership agreement and it involves the equal ownership between two parties. The parties to the agreement share assets, profits and liabilities. The partnership agreement should include the following provisions:
- Name of the partnership
- Division of profits and losses
- Explicit authority of each partner
- Withdrawal provisions
The benefits of this type of partnership is that they are fairly easy to establish and to dissolve. Disadvantages include the fact that each person is liable for the other’s actions and personal assets remain subject to lawsuits.
Tips for finding the best partner
An article in Business News Daily stresses the importance of finding a business partner that is easy to work with on a daily basis. A good business partner could be someone that a person knows or that is part of his or her network already. Referrals from trusted people could also reveal a potential partner.
A clear-eyed evaluation of a potential partner is also an important part of the process. A person looking for a partner should consider a few vital traits.
- Does the person bring new skills to the company?
- Does the person share a compatible vision?
- Are the candidate’s values and experiences complementary?
A good contract is unlikely to rescue a bad decision in choosing a business partner. However, a well-written agreement could lead to an easier dissolution of the partnership if necessary.