Whether you are looking to start or expand your business, you could benefit from a business partnership. A business partnership is an agreement made between two or more parties to share the ownership and operation of a business for mutual benefit. Parties may be responsible for finances, daily management or networking and share any profits, losses and liabilities.
While a business partnership has many advantages, that does not mean every partnership works out. Partners may disagree on many business-related matters, sometimes to the determinant of a business. To protect your interests, you may need to know how to protect your rights in a business partnership. Here is what you should know:
Establish clear terms in an agreement
Every successful business partnership is built on strong partnership agreements. These agreements set the terms of a partnership, including the roles and obligations of each partner. Clearly defining these terms can help avoid any confusion and prevent disputes once the partnership begins by setting expectations early.
Another term to establish in a partnership agreement is business ownership. The ownership of a business can also help establish who can make the final decision for any business matters. However, it may be important to understand the expectations of having the most ownership of a business, such as liabilities and debt.
Identify potential issues
Every business partnership has a few issues. You can create a partnership agreement that anticipates some common issues you may have with your partners, such as having different goals, poor communication or a lack of cooperation.
One of the biggest issues with any business partnership is a breach of contract. A breach of contract can occur when a party fails to fulfill their responsibilities, takes actions that overstep their rights or commits criminal activities. A breach of contract can lead to serious legal issues.
Create an exit strategy
If your partnership agreement does not work out as intended, it is important to have an exit strategy. Your partnership agreement can establish how a business is handled if a partner wishes to leave. Some common exit strategies include buyouts, mergers and liquidation.
It is important to set clear terms for a business partnership. If you are having issues with your partnership, it may be important to understand your legal options and take swift action to resolve any issues to avoid liability.