There are a lot of documents that you want to use when you are setting up a business. One of the most important is a partnership agreement, at least when you’re going into business with someone else.
These documents are often forgotten, overlooked or entirely neglected by people who assume they won’t need them. But they are very important, and below are a few things you need to know.
You need to do this before starting the company
First of all, it’s usually best to set up the partnership agreement before you’ve even opened your doors or started your company. You need to know exactly what obligations you have, what rights you have, how to make joint decisions, how to resolve any disputes in the future and all the financial details of the partnership.
You can choose 3 partnership types
Not all partnerships are the same. The three basic types are as follows: general partnerships, limited partnerships and joint ventures. Many businesses are general partnerships, where rights and responsibilities are shared equally, but limited partnerships also occur when one person has a reduced role.
Partners can be financially liable
If you’re worried about financial liability and having to use your personal money to pay off debts that the business has, you may have considered a partnership as a way to give yourself some personal distance. Unfortunately, this is not what a partnership will do. What you would need to do to remove your own liability is to start an LLC. If you’re in a partnership and the business has outstanding debt, both you and the other partner can be held personally responsible.
We help businesses struggling with partnership agreements and disputes; contact us for a consultation.