A good partnership agreement may not prevent a partnership ending, but it will ensure that if it has to end, it ends fairly, reasonably and cost effectively.
The dangers of any partnership
The start of any partnership can be a very exciting time, when those involved are excited about the future and their new venture. Whilst some partnerships come to an end naturally, with the parties agreeing to go their separate ways, others can end disastrously, with as much bitterness and bad feeling as the worst celebrity divorce.
Planning in case the worst does happen
A good partnership agreement may not prevent a partnership ending, but it will ensure that if it has to end, it ends fairly, reasonably and cost effectively. The advantage of negotiating the terms at the beginning, rather than at the end, means that everyone is signing up at a time when they are unaffected by any emotional constraints which can impair a person’s judgment, such as rivalry or jealousy.
Reduce the risk of fallings out and misunderstandings
A solid partnership agreement, clearly setting out everyone’s rights and obligations focuses everyone’s minds on what they can and cannot do, which reduces the risk of a fall out over a misunderstanding and increases the chances that dissolutions will be straight forward and relatively painless.
For information on costs please see Commercial Costs.