Business partnerships are like marriages, and it is essential to have a document to oversee the relationship between the two parties. This document has different names depending on the type of business entity.
For instance, in a corporation or limited liability company, it is referred to as members’ or shareholders’ agreement, while in partnerships, it is just a partnership agreement.
If you want to form a partnership as a veterinary practitioner, it is essential to understand rules and regulations from your state. These may include the formation of different entities and what elements you need to have in the partnership agreement.
Discover these components in the section below.
Sharing Costs and Revenues
The division of costs and revenues is seldom overlooked when crafting a partnership agreement. Basically, it is one of the main issues discussed in such arrangements. However, some variations need to be considered, such as, but not limited to 50/50 ownership,
- How to make adjustments in the future?
- Can the division be done on a performance-based basis?
- How would you treat a partner who does not want to invest as many hours?
- How will you run contributions towards your retirement plans?
While some partnerships may be founded on a 50/50 division, they may consider amending this in the future if a partner does not follow the rules of equal division.
Terms of Dissolution
While you may get along pretty well when you start the partnership arrangement, things might change. You may not want to continue working together for different reasons later in the business.
Maybe your partner is not putting the equal efforts, or your opinions are not working as you anticipated. Whatever your reasons, it is essential to have a strategy to solve it when it reaches that point. Below are the tips to help you work this out;
Be Realistic from the Start
Though nobody wants to think of failing from the start, it is good to state how you will need to separate in the beginning while you are still on good terms.
Transfers and Buy-Out Options
Another thing to consider when separating from a partnership is how to split the value. One option of doing so is known as the “you cut I choose” method. It involves the partner who wants to separate setting the price and the other agreeing to the said price.
If you are more than two partners, you will need to create a way of evaluating the shares to allow everybody the opportunity of buying them.
Circumstances for Removing a Partner
No matter how much you get along as partners, your agreement should address some “inevitable” situations in the business. For instance,
There should be a guideline outlining how to address a partner’s death, divorce, or disability. Rarely do partners prefer their shares passed to other parties due to these reasons. It is, therefore, essential to lay out how you can solve them from the start.
Other vital components to have in a veterinary partnership agreement includes; How to add new partners and details of operating the partnership.
Having a solid understanding of what to include in a partnership agreement will help the collaboration succeed in the long run. You may download a partnership agreement here for free today for creating a personalized veterinary partnership agreement.