How a solid partnership agreement can save your bacon

How a solid partnership agreement can save your bacon

| Oct 29, 2020 | Contracts |

There is something every entrepreneur needs to understand about a written partnership agreement: It’s not intended for the good times. The halcyon days when the partners are full of good cheer and their thinking is aligned on all the important aspects of the business are not the times that partnership agreements address.

You need a partnership agreement for the hard times and dark days all businesses and partnerships eventually endure. They’re designed for times when one partner gets divorced and it needs to be determined if his share of the business will be divided or remain intact. They’re for the time when a partner becomes incapacitated or dies. They provide guidance when the two partners fall out over a business or personal dispute and can no longer productively work together.

There was a time, generations ago, when handshake agreements were the law. It’s true that handshake agreements can still be upheld in court. But there are plenty more cases that fall apart over a “he said, he said” argument where no documents exist to establish the facts of a past agreement.

Ironclad partnerships can provide for every contingency under the sun, which is quite helpful in a moment of crisis. There is peace of mind in knowing that you already have a blueprint for weathering this storm.

Partnerships are also applicable when all is well with the company and partners. They deal with the division of labor, address and define the value of “sweat equity” and define how and when stock options will be paid. They also deal with the nuts and bolts of your business relationship, so it is definitely important to get it right. A Beachwood business law attorney can draft a partnership agreement that addresses all your needs and concerns.