| It might be tempting to start a business with friends or | | | | the partners to obtain the others' consent before |
| family members and think that you don't need anything | | | | entering into any contractual arrangements, you must |
| in writing because you know each other and believe | | | | make this clear in your partnership agreement. |
| that that you all want the same things from your new | | | | • Partnership decision-making. |
| venture, but what happens if you do start to have | | | | This can be quite a difficult area for partnerships, |
| minor disagreements about how the business is being | | | | especially in the beginning when everyone involved |
| run? And what happens if those minor disagreements | | | | wants to have their say about everything. Unanimous |
| become major disputes? Having a partnership | | | | votes are all well and good but they can impede |
| agreement in place means that you have a referral | | | | business development. You could try a system where |
| point to try and sort things out before they get out of | | | | minor, everyday decisions are made by one partner |
| hand. | | | | but a unanimous vote is required for major decisions. |
| An agreement will allow you to establish a working | | | | There is no right and wrong way but it's an issue that |
| relationship in a way that suits you, your partners and | | | | needs careful consideration when you are setting up |
| the business. It will give everyone a defined role and | | | | your business. You don't want to tie the business up in |
| responsibilities and should deal with the process of | | | | such a complicated decision making process that |
| what does happen if everyone does falls out. | | | | nothing actually ever gets decided. |
| As there is no "one size fits all" agreement, here are | | | | • Management duties. |
| some of the key areas that you should consider when | | | | Being your own boss gives you a great sense of |
| you have an agreement drawn up: | | | | freedom but once you start working with someone |
| • Name of the partnership. | | | | else then you will probably need to have some |
| You need to decide what you are going to call your | | | | guidelines in place about your respective roles within |
| partnership. Will it be your surnames or simply a | | | | the business. For example, who will keep the books? |
| random word (s) that means something to you or | | | | Who will deal with customers? Supervise employees? |
| sums up what your business is about, or you simply | | | | Negotiate with suppliers? Think through the |
| like the sound of it? | | | | management needs of your partnership and be sure |
| Check with Companies house to make sure that the | | | | you've got everything covered. |
| name is not in use to avoid any problems later on. | | | | • Admitting new partners. |
| • Contributions to the partnership. | | | | Eventually, you may want to expand the business and |
| It's crucial that you and your partners work out and | | | | bring in new partners. Agreeing on a procedure for |
| record who's going to contribute what to the business. | | | | admitting new partners will make your lives a lot easier |
| It could be cash, property, services or even goodwill if | | | | when this issue comes up. |
| you are expanding an existing business. Decide exactly | | | | • Withdrawal or death of a partner. |
| what percentage ownership everyone will have and | | | | At least as important as the rules for admitting new |
| do all of this before the business starts to trade | | | | partners to the business are the rules for handling the |
| Disagreements over contributions have blighted many | | | | departure of a partner. You should set up a |
| promising businesses. | | | | reasonable buyout scheme in your partnership |
| • Allocation of profits, losses and draws. | | | | agreement. |
| Your partnership agreement needs to detail the profit | | | | • Resolving disputes. |
| distribution arrangement. This is all about how the | | | | If you and your partners do become deadlocked on an |
| profits of the company are going to be distributed and | | | | issue would you really want to go straight to court? |
| when. You need to consider if the profits and losses | | | | Although you probably can't ever imagine reaching this |
| will be allocated in proportion to a partner's percentage | | | | situation it's a good idea to try and agree in advance a |
| interest in the business? You and your partners may | | | | procedure for dealing with disputes. For example |
| have different ideas about how the money should be | | | | bringing in a mediator or going to arbitration. |
| divided up and distributed, and as each of you may | | | | It may seem daunting to draw up a Partnership |
| have different financial needs this is an area to which | | | | Agreement and you may feel uncomfortable talking |
| you should pay particular attention. | | | | about some of these issues with someone who may |
| • Partners' authority. | | | | be close to you but ultimately having an agreement will |
| Without an agreement to the contrary, any partner | | | | help the business get off to a smooth start as |
| can enter the partnership into a contract without the | | | | everyone will understand what is required of them |
| consent of the other partners. If you want one or all of | | | | from day one. |