Going into partnership – how to protect yourself!
1. Agree on what everyone is putting in. Everyone has different assets and skills and they may not have the same value. All partners should agree on the value of their assets they are contributing, from any premises you are using to equipment that the partnership may need.
2. Agree on who owns anything that the partnership creates. This particularly applies to intellectual property, such as logos and websites. If the partnership is to be dissolved at a later stage, a dispute as to how much such assets are worth and whether they belong to anyone in particular could be expensive, so reaching an agreement in advance could be invaluable.
3. Agree on how the profits are to be distributed and losses are to be shared. In the absence of an agreement, everything is split equally. How disappointed would you be if you’d put in 90% of the hours, but only received 50% of the profits!
4. Agree on what everyone is going to do. What their responsibilities are. What hours they are expected to do. Whether they have to devote all of their time and attention to the partnership or if they can do anything else. This is particularly important if it’s a new business and partners may need to earn an income from other sources until the partnership can afford to pay you all a salary.
5. Agree on when dissolution would take place. In the absence of an agreement, you could be forced to dissolve the partnership if someone died, and you might want to dissolve the partnership if someone was getting divorced. Much better to be in control of events that might otherwise be controlled by others.
6. Agree on what happens in the event of dissolution. How are the assets and liabilities to be divided and what happens to any ongoing aspect of the business.
7. PUT IT IN WRITING. If you can’t prove what was agreed between you and those you are in business with, all assets and liabilities will be divided equally between you, no matter what the value of the assets you contributed or the extra hours you’ve put in.
For further information, contact Stephanie on firstname.lastname@example.org for a free consultation.