3 Key Elements To A Startup Partnership Agreement

If you’re running a small start-up business with a partner, chances are this partner is a good friend, a colleague you trust or maybe even your spouse.

During the early phases of a start-up it is even more so important to put everything in writing. You are laying the foundations to what may hopefully grow into a solid corporation. Many will feel the relationship with the chosen partner is strong enough to withstand any potential disagreement.

If the relationship is strong enough to choose to build a partnership upon, then it should be strong enough to weather through any disagreements. But by putting the basis of this relationship in writing can help avoid many future arguments. Weathering through storms of discords will not only strengthen the partnership but the company as well. Think of it this way: an argument will force you to be creative in finding solutions, and these solutions just may be a new way of thinking or doing things thus solidly improving your product and service.

The very basic and rudimentary components to a partnership agreement can be summed up in these three bullet points:

1. Define the nature of your contribution
What will you and your partner be doing in terms of labor and time consumption? What are you both bringing to the table in terms of initial investment is it a financial contribution or are you providing land, infrastructures or machinery? If your contribution is to provide the warehouse for your storage needs because you happen to have the facility, then what if your company grows and you suddenly need to double the space? Who will provide this? Be sure to be able to answer all of these questions when collaborating together.

2. Establish the value of your contribution
This is the make it or break it part of the agreement. Think long term. Establish time frames and deadlines. Your contract can even stipulate annual or bi-annual revisions. Most importantly, think about how you will feel five or ten years down the road if you’re the primary contributor and the shares are split evenly. Wanting to change the nature of an agreement after years of operation can mean the end of your company.

3. Determine how a partner can terminate the agreement
How can you end this agreement? What will you get from termination? Will the company go on without one of its key partners? Who owns the trademarks, and what if owner is the one to go, or worse yet passes away?

We did the research and found the following links to be the most helpful for small businesses looking for more information on partnership contracts:

1. Business-In-A-Box offers a simple template for creating a Business Partnership Agreement.
2. Docracy offers a wide variety of contracts that are sure to meet the majority of your contractual needs.
3. Printable Contracts is a very rudimentary site without the bells and whistles in high tech design but the focus on the content makes it easy to find templates and samples.
4. Wiki-How walks you through a step-by-step process to write your own contract, because sometimes a template just won’t do!

Marie Lapointe is a San Diego based freelance writer and writes for MacGregor & Collins, LLP.