What to include in a business partnership agreement

Entering into a business partnership can come with conflicts and misunderstandings between you and your new associate. This is why having a written agreement that clearly outlines your rights and responsibilities is important for maintaining a healthy business relationship between partners. Here are some key areas to include in your partnership agreement:

Name of partnership: agree on a name for your business. This may seem simple but many partners have different ideas for what they think the business should be called.
Contributions to the partnership: work out and record how much each person initially contributes to the business, whether it’s cash, property, or services, and decide what percentage each owner will have.
Admitting new partners: agree on a procedure for admitting new partners so that you can equally decide on a new person.
Distribution of profits/allocation of losses: decide how profits and losses are allocated to partner shares.
Partnership decision-making: to avoid conflict when it comes to making unanimous or individual decisions, set up a decision-making process that everyone is happy with.
Death, disability, or withdrawal: if a member of the partnership wants to withdraw from it, or is forced to due to death or disability, then a buy/sell agreement is needed to manage the situation. Consider who you trust to make decisions on your behalf, who would inherit the shares of your company etc.
Resolving disputes: to deal with situations where you and your partners can’t agree on something, set up a mediation clause where everyone can agree on a procedure to resolve major conflicts.
Management duties: work out some guidelines on how the business will be managed. This can include who is responsible for dealing with customers, supervise employees, manage bookkeeping, negotiate with suppliers, etc.
Partner time off: work out how leave will work, including paid and unpaid sick leave, vacations, annual leave etc.
Non-competition clause: if you’re concerned about a partner leaving and then competing with the partnership’s business, you can include a clause that restricts them from doing so within a defined time period.