A Business Partnership Needs More Than Just a Handshake

Although there are some variations, there are three basic business ownership structures:

1. Sole proprietorship
2. Partnership
3. An incorporated entity

In the history of America, there has been a "let's shake on it" attitude where each person's word was his or her bond, and the handshake was the binding action which made it official. Many people here and abroad have begun businesses with or without partners, or acquired them at a later date. Again, many have cemented their partnership, at least in their own minds, by some simple agreement...perhaps more complete and more official than a handshake, but, in many cases, not legally sufficient for later events.

Many things can happen to any business, not all of those "later events" are good. When the "not good" things happen, all partners are at risk. If there is not a good business partnership agreement in place, some may be at more risk than others. The purpose of such a document is not only to help protect the partners, but to help the business grow to the benefit of all concerned.

One of the benefits to the partnership is generally that each partner brings something of value to the business...often, something which, when combined with the contributions of the other partner or partners, is what makes the business more than it ever would have been without it. That something of value might be money, connections, a skill, or some other tangible or intangible asset which increases the overall productiveness and value of the business...at least in theory.

Again, there is no guarantee that things will work out exactly as the partners envisaged. They may be worse...or...they could be better. Much worse or much better, in fact.

A properly executed agreement between or among partners can not only help protect the partners in the event of a negative experience, but can also help protect them in the event of some positive outcome as well!

For a modern partnership to not only function well, but for each partner to fully understand the extent of the role, responsibility, and expectations of compensation relevant to him or her, it is critical that specific terms be stated clearly and, very important, legally, at the outset of the partnership. Such an agreement should outline quite openly and specifically such issues as ownership, capitalization, and operation.

While there have been partnerships in various forms throughout the history of mankind, there have been many which resulted in name-calling, lawsuits, and even murder when events thrust the partners into an area they never expected to enter.

A business partnership agreement does not provide the legal protections in many area which business incorporation does, but it can create a legal document which helps provide at least some of the protections that incorporating does while the business is still at a stage where actually incorporating the business is not in the immediate future of the venture.

Keep in mind that while a properly designed business partnership agreement can provide various protections to the partners, the rules of the particular legal jurisdiction in which it is located. For this reason, as well as the potential complexities of the agreement, it is recommended that prospective partners contact an accountant or lawyer who is knowledgeable and experienced in this area.

In order to save the expenses of hiring such professionals, many people turn to do-it-yourself legal forms kits. While it is possible for intelligent people with a clear vision of what they hope to achieve to create a viable business partnership agreement, as with so many things, it may be less costly in the long run just to hire a professional to prepare the documents.

Donovan Baldwin is a 65-year-old amateur bodybuilder, freelance writer, certified optician, and Internet marketer currently living in the Atlanta, Gerogia area. A University Of West Florida alumnus (1973) with a BA in accounting, he has been a member of Mensa and has been a Program Accountant for the Florida State Department of Education, the Business Manager of a community mental health center, and a multi-county Fiscal Consultant for an educational field office. He has also been a trainer for a major international corporation, and has managed various small businesses, including his own. After retiring from the U. S. Army in 1995, with 21 years of service, he became interested in Internet marketing and developed various online businesses. He has been writing poetry, articles, and essays for over 40 years, and now frequently publishes original articles on his own websites and for use by other webmasters. He offers a line of do-it-yourself legal software, including a business partnership agreement software kit, at http://legalhelp.xtramoney4me.net.