Even longtime friends are sure to have different ideals when going into business together. Those ideals may someday clash, or perhaps one individual might try to act against the best interests of the other.
When partners do not see eye-to-eye, the business can suffer or ultimately collapse. By drafting a comprehensive partnership agreement from the outset, you provide yourselves with the tools to resolve serious disputes or even prevent them altogether.
Establish detailed rights and responsibilities
Common business disputes include those that involve one partner overreaching in their responsibilities or infringing upon the rights of their co-owners. When partners decide upon their respective roles through a verbal agreement, it is easy for misunderstandings to arise. By putting one’s role into writing with a legally-binding partnership agreement, you can enforce the protection of each partner’s rights and responsibilities.
Outline a dispute resolution process
No amount of preparation can fully mitigate the risk of a disagreement occurring between you and your business partner. By including a dispute resolution process in your partnership agreement, you create a mutually-agreeable avenue for coming to a rational conclusion in the matter without letting your emotions affect your actions in the moment. As one example, your resolution process might include a provision for attending a mediation hearing within your state’s court system.
If you decide to start a business with one or more partners, you should fully anticipate that a dispute might arise at some point in the future. Preparing a partnership agreement is a good practice for many reasons, not the least of which is the fact that it can prevent disputes that may otherwise ruin your company.