Partnering with a business in a joint venture is exciting. You can see in your mind’s eye the potential growth of your business and the benefits to your customers. Before you do anything, be sure you have a written contract to protect yourself from anything unseen.
Partnerships are notorious for failing. This might be because contracts are drawn up or deals are made with a handshake or maybe it’s just poor communication. Whatever the reason one thing is for sure, you need a contract, even if you plan on partnering with your Aunt Susan.
1. Purpose Be clear in the purpose of this partnership. How many years will this contract last? What are the goals and expected outcomes of the partnership?
2. Project Lead Be very clear as to who will lead the project. Yes, you are partners but someone has to take the lead to make sure things are completed on time. You can both have equal say in what goes on but one person needs to have the extra one- percent of the vote. State clearly what will be done if a disagreement does come up.
3. Income Distribution How will the income be distributed? Be extremely clear with this and make sure all parties know how this will be divided. You also want to mention who owns what percentage of the company.
4. Bank Account You’ll need to have a joint bank account with equal access to both parties. You might need to register a ‘Doing Business As’ name for your partnership to keep it separate from your individual business.
5. Equipment, Resources, Cost & Value What resources are shared? What resources does the individual partner own? Is there equipment and resources purchased that are a part of the partnership? What did they cost? What is the value?
6. Performance This is where you get down to who does what. Will you split the work evenly or will one person take on a little more than the other will? What exactly will you be doing? What are the expected outcomes?
7. Ensured Performance This states that the work that is promised to your customers must be completed even if one partner bails out on the contract. You are still required to perform the job hired to do.
8. Accounting and Administration Who will take care of the books? Will you outsource this? To Whom? Be very detailed and exact making sure both partners agree.
9. Quarterly Taxes When are quarterly taxes due? How will they be paid? Who will pay them? Be sure this is worked out before they are due so that stress and conflict is avoided.
10. Profit and Loss When all is said and done how will you determine profit and loss? How will this be distributed? If the business partnership ends what will the split be?
11. Specific Work This section you want to be very descriptive of each person’s job. You want to put details about hours to be worked, duties, and requirements.
12. Approval How will changes be approved? Will there be a vote? Who has the last decision? If something comes up and needs to changed, how will the changes be implemented?
13. Changes to the Contract Changes occur all the time and this contract will need to be changed from time to time. How will these happen? Who will make the changes? How will they be approved?
A well-developed contract will save both partners from ending the relationship on a bad note. It will clearly point out each person’s liability and responsibility. It also makes it very clear who will be doing what, when and what the expected outcome should be.