It seemed like a very good idea at the time. Two or more friends/colleagues/acquaintances going into business together, pooling resources to maximise results and each sharing a mutual passion and willingness to succeed.
In the excitement of the moment it is easy to get carried away and forget about documenting basic terms of your agreement. You are in a hurry to start making money and think there will be time later to iron out the finer details with your business partners. You all want to achieve the same goals so what can possibly go wrong?
If everyone pulls their weight and the money starts to roll in there may not be a problem. But what if someone starts to slack off? Maybe you feel like you are the only one generating the sales leads? Sharing the profit 2/3 or more ways might start to grate after a while. Maybe one of you wasn’t quite as certain as you that the new business venture would succeed and might have another business idea on the side just in case your venture did not succeed. This might be distracting their attention away from your business.
Whilst lawyers might be accused of dampening entrepreneurial passion by weighing you down with reams of papers, there is an important reason why we advise clients to document their partnership agreement, and indeed any form of agreement. We want to protect you when you are faced with difficult times.
By documenting your partnership agreement you are making up your own rule book, deciding who will take on which roles, how much effort and/or financial input you will all have to give, how that profit will be shared and on what basis and how problems can be resolved if you hit a bump in the road. Without a partnership agreement disputes can be far harder and more complicated (and expensive) to resolve.
If you are in the early stages of discussing an idea for a partnership venture please contact us today. If you are some way down a partnership you can still have a partnership agreement drawn up if you all agree to sign it.
If you find yourself in the middle of a dispute, contact us today for further assistance.