Small Business Development Center
At Chemeketa Center for Business & Industry
chemeketa students

Category Archives: Partnerships

Think carefully before entering into partnership

By Chemeketa SBDC

What do you think of the idea of a couple of friends going into business together? It’s a good question and unfortunately a pretty tough subject. Some good reasons to choose partnership include shared dreams, financial agreements, shared workload, advantages of support, etc.

But think carefully! These reasons need to be discussed fully before you actually finalize any agreement. Many business partnerships begin with a promise and progress just fine. However, this is the exception and not the rule. Any agreement, expectations, and “what if” scenarios need to be in writing. By having a written agreement and having all partners agree to key issues you have a specific and concrete document to refer to if (and inevitably when) there are any conflicts or disagreements in the future.

Oregon does not require a partnership agreement but it is an essential tool for success. The terms of agreement for a general partnership do not have to be formal but have it signed by all partners and notarized. It is up to you (and your partner) to decide what shape the agreement will take. An attorney can help you focus on issues and suggest possible solutions but you and your partner must make the basic choices – not the attorney.

The following checklist should help:

• What name will be used?

• What happens to the name if the partnership is dissolved?

• How much capital will each partner contribute and what percentage of ownership will each person have?

• What contribution of time, service, and property will each partner make?

• What are the functions and responsibilities of each partner?

• When will owners’ draws be taken, how much and when?

• Are bonuses to be granted? By whom and when?

• How are profit and losses to be shared among partners?

• What will the duration of the partnership be? What guidelines are provided as to how the partnership will be dissolved?

• If a partnership is terminated, how will the business be valued and how will the sale or transfer to a new partner take place?

• Are there any restrictions on the activities of the partners outside the partnership?

As with most legal agreements, it is probably best to consult and attorney and a CPA. Keep in mind that you can change the agreement at any time and you don’t have to start from scratch, but if there are changes, sign and notarize again.

You can find template forms online that you can use as a starting point but you must personalize it. Not to end on a negative point but think of all the things that can go wrong and plan for them up front.