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Have you left anything out of your partnership agreement?

A general partnership is often the structure of choice when there is more than one founder for a new business. When you are about to go into business with others, you may run into differences of opinion as to how best to proceed.

A written partnership agreement should include the key points and rules to live by. There are many questions that you need to answer with this document.

Partner expectations

You and your co-founders should take negotiations seriously when deciding who gets what from this new business. You need to know what percentage each person gets. Is it subject to vesting? What assets or cash infusions should each partner provide? What salaries, if any, should founders receive?

Responsibilities

There may also be some concerns among co-founders about time commitments to the business. You may be entirely dedicated to making the fledgling company a profitable enterprise, but one or two of the co-founders may not yet be able to devote all their time to the startup. Knowing this, what are the responsibilities for everyone involved?

Disputes

Managing the differences in outlook and ideas as you are in the process of forming your partnership is one thing, but serious disagreements that arise once the company is up and running can clog the gears in a hurry. How do you intend to resolve disputes to avoid litigation? Indeed, how do you remove a founder, should that become necessary? Many business partners choose to include a mediation or arbitration clause in their contract.

General liability

You and your partners will share a general responsibility for the debts of the new business. Keep in mind that personal assets could be exposed to creditors. Everyone should be clear on this.

Goals

Just like the rules you establish, you should explain in writing the vision you have for your business. Years from now, when the new company is flourishing, you can look back with pride to the disagreements and snags you and your co-founders ironed out with the help of a well-constructed partnership agreement.

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