Business owners may decide that it is time to create a partnership but have a much harder time deciding on a partner. There are numerous aspects that individuals must consider before entering into a business partnership with someone else. Once all parties agree to form a partnership, they must work to draft a comprehensive agreement that covers all aspects of the professional relationship.
Entrepreneur lists several aspects of partnership arrangements that require consideration. One of the most important factors is trustworthiness. In any business arrangement, it is essential that all partners trust each other. However, Entrepreneur cautions that personal friends do not always make good business partners. Problems in a personal relationship may spill over into the professional partnership and lead to negative consequences in the business. Before creating a partnership, it is essential that all parties understand their individual responsibilities, compensation and level of authority.
Once all parties decide that a partnership arrangement would be beneficial, it is time to make it official. A partnership agreement generally covers all the aspects of the arrangement so that it is clear to everyone how the legal entity will function. According to Forbes, there are several things that should be part of a partnership agreement. One vital issue to cover involves ownership. Partnership agreements may include information about how future ownership transactions will occur, such as what happens if one partner decides to withdraw or wants to sell the business. There are also financial issues, including contributions and distributions. Partners may agree to evenly divide the money they contribute to the business and the profits, but non-equal division agreements may also occur. A clear and comprehensive partnership agreement may reduce the risks of disagreements that threaten the business itself.