Before people agree to start a partnership, there is a lot involved trying to build trust and mutual agreement. Among them there is opening a joint account, signing contracts that may call for legal matter management and signing a business agreement. This agreement has the following major purposes:
Dispute resolution
Every relationship comes with its own disagreements and business relationships are not left out. Business relationships means financial decisions, business and legal decisions have to be agreed upon by both parties. a clearly made agreement foresees this and will outline ways of how this disputes will be managed if they occur. The terms outlined in the agreement will prevent friction and bad blood between business partners.
Dispute prevention
Agreements force business partners to have an open and clear discussion about the “what” and the “how” of the business. Such discussions will ensure that disputes that may have occurred without the prior discussion.
Clarify the structure of the business
The process of coming up with a business partnership agreement will force everyone involved to come to the same agreement about everything concerning the business right from the start to how the business will be run. This apart from coming up with fair decisions, it also ensures that both the profits and the losses are shared equally.
Enable the transition of the business
Things happen, a partner may want to quit, or the other partner may want the other to exit, or he/she passes away there will be provisions that specify what will happen to the business.
In conclusion…
Having a business partnership is necessary for a small business that has more than one owner. Agreements cater for both the highs and the lows, the management, the profits and losses so don’t risk overlooking such an important aspect.
