Business partnership agreement

Business partnership agreement

It can be tempting, when starting a business with another person or entering into a form of business arrangement with another entity, to just crack on with the job at hand. However, signing a business partnership agreement contract first, is a far better use of your time. Here, we look at why and what any good business partnership agreement template should include.

What is a business partnership agreement?

A business partnership agreement is a legal document that records and outlines the details surrounding a business relationship that is structured as a partnership. In that way, it will identify how the business is owned by stating how much each partner holds of the company. A good business partnership agreement template should therefore also state how profits and losses are to be distributed in accordance with that ownership structure. 

Importantly, even a small business partnership agreement should also detail what is expected of each partner in terms of their responsibilities. And, even at the very preliminary stages of a partnership, a good agreement will also identify the steps that should be taken when a partnership is to be dissolved, under what circumstances, and when. Identifying how a partner can sell his or her part of the business is therefore helpful too. 

How does a business partnership agreement work?

By detailing all of the above, a business partnership agreement can work by giving all partners clear boundaries and guidance on what is their place in a business partnership. If structured optimally it should also be a highly reliable document that provides partners with protection in the future should the business arrangement go awry. By writing down the terms and conditions of a business partnership and also by having the document signed via mutual assent by all involved, there is little room for misinterpretation or assumption on anyone’s part. 

Advantages of a business partnership agreement 

Some of the advantages to a good business partnership agreement have been alluded to above. Firstly, the protection it provides both sides of the contract is not to be overlooked as highly beneficial. With money at stake, it is crucial to ensure that both parties can extract their investment from a company and get paid properly too. It helps avoid any financial issues. Plus, in some countries, if there is a business partnership agreement in place, there are limited legal repercussions for partners, should the other partake in illegal activity through the business. 

Additionally, it can help make the business partnership more efficient and effective from the outset if responsibilities are clearly defined in the contract. By knowing what is expected of them, everyone knows their role so that they can focus on aspects of the business specifically, while knowing what the other partner is doing. 

Contractbook and business partnership agreements

Contractbook has a business partnership agreement in its contract template library. While it may be tempting to use a business partnership agreement PDF, we would always recommend using our data driven, machine readable format. It means that data can be extracted from your agreement in future, as well as having the ability to be stored more effectively in our cloud based storage solution.

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