Things You Need to Look for in Partners before you Sign the Partnership Agreement in Missouri
A partnership agreement, also a partnership contract, a business partnership agreement, or the general partnership agreement, is the legally binding document that stipulates the rights, responsibilities, roles, and the relationships among the partners and to the partnership (by the partners. This agreement, like other written contracts, legally binding.
But even with the excitement that surrounds most new businesses and partners, there are many times that the partners overlook important things about each other and the business, specifically things that would have a significant impact on the business. In this article, we’ll look at the important considerations you need to bear in mind before you sign that agreement. But first, let’s take a brief look at the partnership agreements and why we recommend getting one prepared today, even though the state of Missouri doesn’t require you actually to prepare one.
Significance of the partnership agreement
A partnership agreement in Missouri carries a lot of weight. Below is a highlight of the importance of the agreement between partners.
The agreement specifies the capital contributions of each partner to the partnership
It specifies how the profits and losses will be distributed
How the partnership business will be governed and the ownership percentage. Note: it’s never a 50/50 split.
Partner authority, involvement, and whether the partners should sign non-competes
It outlines the specifications regarding exit strategies
Onboarding procedures for new partners
The agreement guides on dispute resolution matters
Creating the Missouri partnership contract
Today, you can prepare a partnership agreement specific to your business/ partnership structure, at the comfort of your home, office, or wherever else you all choose to meet, thanks to the free Missouri partnership agreement form we’ve prepared for you (with the help of professionals). Using this sample partnership agreement in Missouri, you get to specify the terms, as well as the provisions that you have in place, to ensure the success of the partnership business.
The free Missouri partnership agreement form has all the important clauses that you need in a partnership contract, which means that your only job is to specify what you want for your partnership and then sign the document once all the parties agreed to the provisions laid out, and also after you are convinced that the agreement you just prepared offers a comprehensive coverage of everything you need in your partnership contract.
Note, however, that you can only sign the agreement when you are certain of some things about the other people you are getting into the partnership with.
Looking for the Right Business Partners
These considerations include:
You might have grown up with the person(s) you are about to get into a partnership with, but do you really know them? Or rather, what exactly do you know about them? And most importantly, what will the needs of the company be, and will the partners you have in mind be capable of fulfilling those needs? While having candid conversations with your potential partners, talk to your mentors or acquaintances about the partnership, and the needs that you will be expected to fulfill.
Having a clear definition of roles
As mentioned above, a partnership’s management/ governance is never run on a 50/50 basis. One person often holds more power because they take on more responsibilities than the other parties to the partnership. Also, a 50/50 split is not a good idea because such a split makes decision making harder. So, to ensure that the business is steered in the right direction at all times, you need to appoint one partner and assign them more roles. For this to happen, the governance of the partnership will be on a 60/40 or 70/30 split, with the managing partner having more control over the day to day operations of the partnership. It’s important to remember that failure to assign specific roles would result in counterproductive results.
Developing a money plan
The partnership agreement will help here, but you need to first agree on things like profit-division methods, compensation to partners for their contributions, and how much each partner will put into the partnership. Figure out the best answers/ methods for dealing with money before you sign the agreement.
Synergy over the long-term goals
While short-term goals may drive the business, that will only be the case in the short-term. For the glory that grows out of shared success, you need partners thinking in the long-term. So, come up with short-term and also long-term strategies that will ensure that your company runs successfully in the long-run. For the long-term survival of the business, you need to have a common vision; the overall direction of the business.
Don’t forget to make provisions for the exit strategy that will guide you in the future. Exit strategies give partnerships defined paths, but most importantly, they ensure that the partnership doesn’t crumble from failed relationships.
Ready to create an airtight partnership in any of the cities of Missouri such as Springfield, St. Louis, Kansas City, Columbia, Joplin, Branson, Jefferson City, etc.? Download our free partnership agreement form here to get started.