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How to produce a partnership agreement

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.

Making the case for a business pre-nup

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 a template agreement, check out www.clickdocs.co.uk or www.the-legal-shop.co.uk

Wishing you a fruitful and rewarding partnership!

__________

Emma Jones is Founder of Enterprise Nation the home business website and author of ‘Spare Room Start Up – how to start a business from home’ Her next book ‘Working 5 to 9 – how to start a business in your spare time’ will be published in May 2010.

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About Emma Jones

Emma Jones is Founder and Editor of Enterprise Nation, the home business website. She has successfully started two businesses from home offices in London, Manchester and rural Shropshire. Following a career with an international accountancy firm, Emma started her first home based business at the age of 27 and successfully sold it just 15 months after launch. Redbrick Enterprises Ltd was founded in 2002 to advise the public sector on effective homeworking. Spotting a gap in the market to provide information and inspiration to homeworkers, Emma launched Enterprise Nation [www.enterprisenation.com], the home business website, in January 2006. The website is a free resource for people starting and growing a business at home and has a readership of more than 390,000 people. As well as site content, there is also a free fortnightly e-newsletter and podcast. Emma’s first book on how to start a business from home Spare Room Start Up: How to Start a Business from Home will be published by Harriman House in May 2008.

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6 comments

  1. At ContractStore we also offer partnership agreement templates for a range of different partnerships. You can get tailoring services and free downloads too. Our free Checklist for Shareholder Agreements is especially popular – http://www.contractstore.com/shareholder-agreement-checklist

  2. I’m pretty confident that most succesful businesswomen would use a solicitor to draft their partnership agreement, rather than a template agreement, to ensure that it is correctly tailored to the nuances of their business and their trading relationships. I’m surprised that you advocate this approach!

    You can find a reputable solicitor via the Law Society at http://www.lawsociety.org.uk/choosingandusing/findasolicitor.law

    Look for someone specialising in commercial law in the drop down box.

  3. The reason we offer templates online is not to eliminate the need for a solicitor, but to simplify the process and reduce legal costs.

    It also enables the business person to educate themselves as to what they need to think about when entering a new agreement or relationship, at a very low cost. You are much better equipped to have a meeting with a lawyer if you have read through a typical document beforehand.

    We make it clear that our documents are not a substitute for legal advice and that users should consult their own solicitor or come to us for a suitable contact if required.

    The advantage of templates is that the user can get close to what they want, saving the legal fees on the early stages of meetings, drafts, and so on, and being in a better position to understand the process.

    More about this and related topics can be seen on our video channel at http://www.youtube.com/watch?v=qgRbEbJuNPA

  4. I’ve read Emma Jones’ Spare Room Start Up book and would thoroughly recommend it to anyone who hasn’t read it yet. Would also echo the bit about any agreement having to feel fair to both parties otherwise it will start to grate on you over time.

  5. You can get very cost effective employment templates which would be suitable for this. A lot of them will let you customise them to suit your terms too so there is a lot of flexibility. Our documents are approved by Ashfords solicitors too.

  6. Very good points, I would definitely agree that a partnership agreement is much like a prenuptial agreement, although I never thought of it that way before! I also believe it’s ok to get ideas from a template, or online form, and then mold them into what you need. Seeing a lawyer is usually a good idea, but why not educate yourself first on what the options are available?

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