When two or more people come together to form a business relationship, the legal presumption is that a partnership has been created, absent of any documentation or agreement. While a Partnership Agreement is not a requirement to act as a partnership, it is an important document to have from the beginning in order to outline the intentions of the relationship throughout the business’s lifecycle.

Some people rely on a handshake, however, whether you’re working with your close friend or a casual acquaintance like in any relationship there will be issues that surface at some point. Take some time to plan when the partnership first forms and everyone is on the same page. Without a Partnership Agreement, you can open yourself up to costly litigation if a dispute arises between the partners, and unintended consequences resulting from the application of the Partnership Act to your business may result.

Some of the key items that should be considered in a Partnership Agreement are the divisions of the day-to-day responsibilities, the operating costs and the profits and losses. Documenting what each partner brings to the business, such as client lists or a logo, or more tangible assets like a storefront or work truck are also important information to include. Considerations on how banking and accounting will be managed, and how partners will be paid out of the business are some of the logistical details that will help clarify the partners’ intentions. Another significant stage to plan for is when a partner leaves the business for reasons such as a buy-out, death or disability. Including these exit strategies will help to avoid conflict or uncertainty later.

Coming to a consensus on these issues early in a partnership will help lay the groundwork for a successful business. Working with a lawyer to draft a tailored Partnership Agreement will ensure your intentions are set out clearly, so you can focus on building your business.