Black Friday | 25% off online accounting for 6 months!
With many home-based businesses now growing by outsourcing and partnering, as opposed to taking on staff, it’s important to have an agreement in place with new partners that allows for a smooth running and profitable partnership. Emma Jones explains how to go about it.
Do you remember Paul McCartney going to court with estranged wife Heather Mills to battle it out for who got what? Commentators made the point that a pre-nup would have saved lots of time and money. Consider a partnership agreement as your pre-nup in business. At the outset of a relationship, all is good and you’re excited about potential but be safe; have a few things written and agreed so both parties are clear on expectations.
The following should not be taken as concrete legal advice, more of a guideline on how to draw up an agreement. An agreement only need be a single page and cover the basics:
Scope of agreement – what is your partnership working to achieve, for example “This agreement is made between Company A and Company B. The agreement is related to the generation of online advertising revenues/hosting of an event/development of a new product.”
Respective responsibilities – set out the expectations on who does what. For example, Company A will be responsible for promotion and business development and Company B will take on technical development and client care. Also include note of how you’ll keep each other briefed, maybe through the use of an online project management tool such as Basecamp.
Finances – what will be the split in revenue, and is this before or after costs? And who owns the intellectual property of the product/service/activity? Consider including a clause that states the agreement will be reviewed in six months so both parties can check on progress and have the right to cease the agreement if it hasn’t gone as planned.
Be fair – agreements where both parties feel they’re receiving their fair share are likely to be longer-lasting than those where one party feels embittered. Talk about this before writing and concluding the agreement.
Sign it! – after making effort to produce an agreement, be sure to sign it! And then store it so you can access if the need arises.
When writing the clauses in your agreement, think about all the things that could go wrong and safeguard against them. It’s a practical exercise and won’t harm your newly formed business relationship but will get it off on a firm footing.
If you’re looking for advice on how to pick your business partner, you can check out our article, “How to choose the right business partner“, for some useful pointers.
Wishing you a fruitful and rewarding partnership!