Starting a small business can be an exhilarating and exciting experience. However, it’s essential to lay the groundwork with a partnership agreement in place before starting a company. A partnership agreement is a legal document that outlines the rights, responsibilities, and obligations of each partner in a business. It’s crucial to have a partnership agreement in place, especially in a small business partnership, to avoid any disputes or legal issues that may arise later.
In New Zealand, small business partnership agreements are governed by the Partnership Act of 1908. This act outlines the provisions that are required in a partnership agreement, including the name of the partnership, the business purpose, the duration of the partnership, the capital contributions, the distribution of profits and losses, and the responsibilities of each partner.
Here are a few things to consider when drafting a small business partnership agreement in New Zealand:
1) Identify the partners: The partnership agreement should clearly identify each partner involved in the business, including their role, responsibilities, and financial contributions.
2) Decide on the business structure: The business structure should be decided upon, whether it`s a sole proprietorship, partnership, or limited liability company.
3) Agree on profit and loss sharing: The partnership agreement should outline how the profits and losses will be shared among the partners.
4) Outline the decision-making process: It is essential to specify the decision-making process of the partnership, including how decisions will be made, and who will have the final say in any disputes.
5) Specify the duration of the partnership: The partnership agreement should outline how long the partnership will last and the process for ending the partnership.
6) Include a non-compete clause: A non-compete clause can be included in the partnership agreement to protect the business from potential competition from the partners.
It’s crucial to seek legal advice when drafting a small business partnership agreement in New Zealand. A lawyer can help ensure that the agreement is legally binding and covers all areas necessary to protect the business and each partner.
In conclusion, a small business partnership agreement is a crucial document that outlines the expectations and responsibilities of each partner involved in a business. A well-drafted partnership agreement helps avoid disputes and legal problems down the track, giving the partners’ peace of mind and a clear path forward.