How To Write A Partnership Agreement To Prevent Business Disputes


A partnership agreement is a legally binding document between two or more business partners that establishes the responsibilities, profit and loss distribution of each partner. Often, partnership agreements include a variety of general rules for each member to follow. A partnership agreement is an essential document for and team, group or duo intending to build a business together. It should be created long before worrying about your commercial building maintenance provider. If you are part of an entrepreneurial partnership, learning how to write up this type of contract could be essential to your project’s success. To learn more about how you can write up a partnership agreement, keep reading below for our step-by-step guide.

Step 1: Identify Those Involved

Every contract must start out explicitly stating the parties involved. For the purposes of a partnership contract, you would need to list each of your names, as well as the company or partnership alias you plan to operate under. This step is essential because the contract can only be effective when all included parties are understood.

Step 2: Agreed Contributions

The next step to crafting this type of document is to identify the agreed upon contributions of each party. The initial investments of each partner is an important part of the contract because it may effect who is given the authority to make business decisions or who receives a larger percentage of future profits. This is especially important if you are considering dental practice financing or another type of business financing. Sit down with your partner and discuss what resources each of you are putting into the business so that you can agree upon these terms.

Step 3: Decision Making

You want to be sure to include a decision making process in your partnership agreement. This should include how you will make business decisions, specifically when there is a tough decision to be made and no general consensus shared. Creating a decision making clause that includes step by step direction for how to proceed, if at all, in the case of a deadlock will prevent you from business disputes further down the road. Make sure to include this part in your partnership agreement.

Step 4: Profit And Loss Allocation

Once you have determined who is contributing what, you are ready to discuss profit and loss allocations. You must decide if business profits and losses will be allocated in proportion to the partner’s ownership interest. You may wish to consult a Yacktman professional before making these decisions. Take the time to consider your varying financial needs and come up with a solution that suits both parties.

Step 5: Partnership Authority

Identifying the partnership authority dynamic will be another crucial point for your partnership agreement. This is where you will identify the authority of each individual partner. Will one person be making the official decisions? Will you consult one another on everything? It is good to outline the boundaries of each partner’s authority to ensure that everyone operates within their limits.

Step 6: Resolving Disputes

In order to finish your partnership agreement, you will need to have a section dedicated to resolving disputes. There, you will determine what happens when the individual partners cannot agree upon a decision. If there is a deadlock will you go to court or find another way to come to an agreement? Expressly state your options in the partnership agreement so that everyone knows the potential outcomes of a disagreement. This is much more important than deciding on a telephone answering service right away.

Creating a partnership agreement does not always require the direct consultation of an expensive lawyer or PPI. Especially if you are just starting out in the business industry, it may pay off for you to take the time to craft your own partnership agreement. As long as you follow the outline listed above, you will have a sufficient contract available to help guide you and your partner on the path to success.

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