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Do you need a partnership agreement with family?

On Behalf of | Jun 3, 2022 | Business-Employment

If you start a business and want to work with family, you may not think that a partnership agreement is important. However, this kind of agreement can help you protect yourself and make sure that you’re both held accountable when running the business.

A partnership agreement should be seen as a kind of insurance policy. It is there to make sure that if things don’t go as planned, you and the other party are held accountable to what you said you’d do.

What will a partnership agreement cover?

Partnership agreements cover a few different topics including:

  • How votes are decided if there is a deadlock for some reason
  • What is or is not an asset of the partnership
  • How profits will be split between yourself and other partners
  • Purchase options, so you can allow partners to buy out other partners’ shares
  • Spending limits for junior partners
  • How to resolve disputes
  • Agreements about the partnership extending beyond death

Not all partnership agreements are going to be the same, but it is helpful for you to develop one that addresses the most common issues you will come across with your type of business.

Can you set up a partnership without an attorney?

Yes, but you may not want to do so. There are many complexities that could alter the way your agreement should be written. If you don’t have the legal knowledge to make decisions about the business and your contract, it’s usually better to have someone who is experienced in the field help with your contract.

You and your partner or partners may want to sit down and have your own agreements drawn up separately or to have your attorneys meet to discuss a single agreement that would benefit and protect all of you.

Depending on how much money you’re bringing to the business and how you plan to run it in the future, a good partnership agreement can help you be sure that you will get what you deserve and be able to avoid some of the most common issues that arise between partners.