# 10 Essential Elements to Include in Your Business Partnership Contract
When entering into a business partnership, it is crucial to have a comprehensive partnership contract in place to ensure that all possible contingencies are addressed. In this beginner’s guide, we will discuss the 10 essential elements that should be included in your business partnership contract, as recommended by business leaders from Young Entrepreneur Council.
## Voting Rights Structure
– Clearly define the voting rights structure for any management decision.
– Allocate voting rights based on dedicated functions or shared functions to avoid potential conflicts.
## Clear Roles, Responsibilities, and Contributions
– Outline each partner’s roles, responsibilities, and contributions to prevent miscommunications and conflicts.
## Dispute Resolution Clause
– Include a dispute resolution clause specifying how conflicts will be managed, whether through mediation, arbitration, legal action, or other means.
## Crisis Management Plan
– Incorporate a crisis management plan to address potential challenges and set up fail-safe measures before a crisis emerges.
## Profit Distribution Explanation
– Specify how profits will be split, whether proportional to revenue contribution or evenly distributed, to ensure clarity and fairness.
## List of Shared Resources
– Define and agree upon a list of shared resources, including information, equipment, and human resources, to avoid potential conflicts.
## Non-Compete Clause
– Include a non-compete clause to prevent partners from using company secrets to create competing products.
## Goal Measurement Metrics
– Establish the metrics to measure goals and expectations to create a foundation for a healthy business partnership.
## Succession Plan
– Address the succession plan and leadership transition in the event of unforeseen circumstances to ensure clarity and peace of mind.
## Exit Strategy
– Define a clear exit strategy in the contract to handle asset division and debt management in the event of partnership dissolution.
By incorporating these 10 elements into your business partnership contract, you can mitigate potential risks and conflicts, leading to a more secure and successful partnership. When committing to a business partnership, careful planning and clear documentation are essential for long-term success.
