Many business partnerships in Texas start with trust. But without a written agreement, that trust can turn into problems. To avoid these misunderstandings, establish a clear set of rules. These rules serve as guidelines. They explain who does what and help you avoid costly fights. Whether you are starting a new business or making things official, put everything into writing. Below are the key points every business owner should know about partnership agreements.
Key parts to include
A good partnership agreement should clearly outline the ownership percentage of each partner. It should also:
- Show what each person puts into the business: How much money, property, services or ideas should each partner put into the business?
- Explain how you and your partner will split profits and losses: Will you take money out regularly or wait for a larger payout later?
- Be clear about each partner’s job: Who runs daily tasks? Can one person sign contracts or borrow money without asking the other?
Set rules now to stop arguments later. Taking the time to discuss and agree on these points can save your business from serious trouble down the road.
How to handle problems and exits
Even close partners can argue. You can prevent this by providing guidelines on how to handle disagreements. Some of the options available include discussing issues, using a mediator or going to arbitration before resorting to court.
Additionally, if one partner wants to leave or pass away, explain how the other can buy them out. Also, plan what happens if you close the business. Decide how to split money, property and debt. This helps protect everyone.
Make sure it complies with Texas rules
Texas does not make you write a partnership agreement. But if you do not, state laws will decide things for you. Those laws may not align with what you and your partner want. Use the Texas Business Organizations Code as a guide. Think ahead, too. Consider turning your partnership into an LLC or a company later.
Talk to a lawyer
You do not have to figure everything out on your own. A business lawyer can help you write or review your agreement. They can clarify unclear parts, suggest helpful guidelines and ensure they align with your business.
Before you sign, take time to protect what you are building. A clear partnership agreement can keep your business running smoothly and prevent legal trouble.