Launching a business with a trusted partner can be an exciting time for those involved in the project. It is also a time during which Ohio small business owners should take great care to protect their interests. Part of doing that includes drafting a partnership agreement. No matter whom the partner may be – from a family member to a best friend – these contracts provide legal recourse in the event that the situation changes.
According to the U.S. Small Business Administration, there are several items that must be outlined in a partnership agreement, such as the following:
- How any profits or losses will be allocated
- How much of the company each partner owns
- Each partner’s contribution to the company
- How decisions will be made regarding the company
One key aspect of this agreement should address who may legally commit the company to a contract. For example, is one partner able to enter into a contract that binds the partnership to the terms of the agreement? Or will that partner have to first consult with the other owner? To that end, the contract should include information on how any dispute will be handled. The SBA also suggests that the agreement takes into consideration what happens if one partner dies. This may include a buy/sell agreement.
The Ohio Business Gateway provides a number of resources for people who are starting a business in Cincinnati. While partnership agreements are not a requirement, experts strongly encourage them to people who want to minimize the risk of unnecessary and costly litigation.