So, you’ve decided to go into business, and you found the perfect business partner. Maybe you to have the same vision, or you compliment each other in some way. Maybe you’ve known each other for years or maybe you’ve just met.
Business Law Basics Dictate These Factors to Your Business Agreement
Ownership
You will need to determine and record how much each partner owns. Are you equal partners with a 50/50 split, or does one of you own a larger percentage of the business than the other? This will need to be included in your business agreement.
Contribution
Percentage of ownership does not necessarily reflect contribution. How much each partner is going to put into the start of the business should be decided upon ahead of time and recorded for legal purposes. You should also add information as to what will occur if the business requires more money or unexpected funds. Who is responsible for contributing those funds? Is the other partner responsible for paying them back? This is an essential element to your agreement.
Distributions
Many people think that you simply put the money from your business into your bank account. This is not true, nor should it be. You need to account for how much money is being distributed back to the business and how much is being distributed to each partner. It is a wise decision to decide ahead of time to place a certain amount of money or percentage of income into the business itself.
Decisions
You’ll need to put down information concerning who makes decisions when decisions need to be made, and if you will have equal decision-making power, what will be the tie-breaker if there is a stalemate.
Dissolution
It can get tricky when one partner wants to leave the business and the other doesn’t. You’ll need to outline whether it needs to be a mutual decision, or if there will be money owed in the case of a dissolution on one side. Create an exit strategy while spirits are high.
Starting a business with another individual can be trying, but if the basic guidelines are laid out in the beginning, you will be able to prepare for almost any scenario.
Sources:
http://www.nolo.com/legal-encyclopedia/how-form-partnership-new-york.html
