Black law dictionary defines partnership as a voluntary contract between two or more competent persons to place their money, effects, labor, and skill, or some or all of them, in lawful commerce or business, with the understanding that there shall be a proportional sharing of the profits and losses between them.
Partnership Agreement on the other hand is an express or implied agreement made between two or more parties, depicting their entry in to a for profit business and making them official partners. The agreement depicts the nature of business, their profit sharing ratio, the capital put up by each partner as well as their duties and responsibilities. A valid partnership might exist between partners without any partnership agreement.
If you are starting a business with a partner or you are already in business and you intend bringing a partner on board,below are some relevant questions you should take into consideration.
1.Is my business ready for a partnership?
What this question simply addresses is whether or not you are willing to give what it takes to sustain the interest of your intended partner.Understand that no partner comes aboard a business without expecting something in return.Unfortunately,this is where most business partnerships encounter problems .People go into partnerships for the wrong reasons,they are only interested in the perks that come with partnerships.Creating a partnership entails giving up a degree of your ownership rights to the business.Be absolutely sure that you and your business are ready for that before going in.
2.DOES MY INTENDED PARTNER COMPLEMENT MY EFFORTS?
Creating business partnership is beyond the coming together of two human beings to start a venture,In making a choice for a partner it is recommended you look out for people who may not necessarily possess similar temperaments as yourself but people with diverse traits.
The last thing you need in your business are people who can perform similar roles as yourself.There is beauty in diversity.
However,all prospective partners must show a strong sense of commitment to making the venture work from the onset.
3.What contribution does my intended partner bring to the table?
Please,ensure that you and your intended partner spell out your contributions to the business before a partnership is formed.Contributions could come in several ways financial or capital work force or both.
All forms of capital contribution must be clearly spelt out and calculated.The ability of business partners to provide clear information on this regard would help in providing clear information on what to expect as their return in investment.
4.HOW DO WE RESOLVE LEGAL DISPUTES?
In any enterprise where two or more persons co-exist,disputes are bound to happen imagine you had a fall out with your business partner and you opt to settle your dispute by way of court litigation.
I don’t need to describe the extent of damage such process would do to the business.That is why i always advice my clients especially those in business to opt for A.D.R as against litigation.
Partners can determine how or where they wish to resolve future disputes as regard the business before a dispute occurs.I strongly recommend that an issue of such nature be considered and agreed on when partners are on best of terms as they stand a chance of been favourably disposed to any issue at that stage.
Alternative means of resolving disputes are cost and time effective and proceedings are confidential in nature.
5.How do we measure our commitment to our business partnership goals?
By all means ensure that you and your partners are committed to the success of the business in the first place.You do this by setting out goals for the business,how to achieve them as well as timelines for achieving them.
This helps in ensuring all hands are dedicated to see the business venture succeed.Starting out with a partner requires hard work and mutual commitment by both parties,such business stands a greater chance of success.
6.How do you ensure that all partners keep to their end of the bargain?
Nothing compels commitment to a business like partnership than a written contract (i mean a written contract not oral no matter the person you are planning to venture with)reflecting the intentions of all concerned parties.Where a written partnership agreement is created by both parties the law and the courts respect such agreements and is restrained from interfering with the decision of both parties.
where a partner fails to fulfill his obligation in such agreement,the other partner can ask the court or any panel entrusted by parties with resolving disputes for an order compelling a defaulting partner to act according to the terms of an existing agreement.
Need help venturing into a business partnership?Need assistance in drating your Partnership Agreement book a session with us.