Starting a business partnership can feel exciting – you’ve found someone who shares your vision, your workload, and hopefully your enthusiasm for the future. But while partnerships can be rewarding, they can also be complicated. Many business owners jump in without fully considering the legal and practical implications, only to face issues later down the line.
Here are 7 things you may not realise when starting a partnership – and why getting the right agreements in place matters.
1. A Handshake Isn’t Enough
Many partners start off informally, trusting that mutual understanding is enough. Unfortunately, when disagreements arise, verbal agreements rarely hold up. A written partnership agreement is essential. It sets out expectations, responsibilities, and protects you if the relationship breaks down.
2. Profit Sharing Isn’t Always Straightforward
You might assume profits will be split 50/50, but that’s not always fair or practical. One partner may be investing more time, money, or expertise than the other. Without clear terms in writing, disputes about who gets what can quickly sour the relationship.
3. You’re Liable for Your Partner’s Actions
In a general partnership, you’re jointly responsible for debts and liabilities. That means if your partner makes a bad decision, you could be held accountable too – even if you weren’t involved. Many business owners don’t realise this risk until it’s too late, therefore a clear understanding in an agreement is necessary.
4. Decision-Making Needs Rules
What happens if you disagree? Who has the final say? Setting out how decisions will be made – especially on big issues like taking on debt, hiring staff, or buying assets – avoids conflict and resentment.
5. Personal Circumstances Can Impact the Business
What if one partner wants to retire, becomes ill, or simply loses interest? Without clear exit clauses or succession planning in your agreement, you could be left with uncertainty – or even a forced dissolution of the business. Without an agreement this is a huge risk.
6. Disputes Can Be Costly
Even the strongest partnerships face disagreements. Without a dispute resolution process in place (such as mediation before court action), conflicts can escalate quickly and drain both time and money.
7. A Partnership Agreement Protects the Relationship
Ironically, some business owners avoid formal agreements because they don’t want to appear untrusting. In reality, a clear partnership agreement strengthens trust. It shows that both parties are committed, transparent, and serious about the business.
READ MORE about Partnership Agreements here.
Final Thoughts
A business partnership can be hugely successful – but only if it’s built on a strong foundation. By addressing the issues above before you start, you protect both the business and your working relationship.
At BEB Contract & Legal Services, we specialise in drafting bespoke partnership agreements that cover all the key points – from profit sharing and decision-making to exit strategies and dispute resolution.
👉 If you’re considering a partnership, or want to make sure your current agreement protects you properly, get in touch with our team today.