Whether you’re starting a new business with a friend, family member or business associate, it’s important you seal the deal with the right paperwork. Legal documentation not only protects both of you if something goes wrong, but it also outlines, in writing from the start, exactly what your duties and expectations are.
In addition to your own legal interests, though, you’ll need to file paperwork to make your business official. Here are a few legal documents that are essential for any new business partnership.
Business Partnership Agreement
Before you even announce your new business, you should put a formal partnership agreement in place. This essential contract will outline in writing the responsibilities of each partner, as well as how any profits and losses will be distributed. Every concern you have should be answered in that agreement, including under what circumstances your partnership can be dissolved and how that will be handled. Although you don’t need an attorney to execute this agreement, it can help avert disaster down the road if you at least have a legal professional review it.
Government Registration Applications
Once you have everything squared away internally, it’s time to start registering your business with state and federal authorities. This typically means choosing a name and completing a certificate of limited partnership, limited partnership agreement, certificate of limited liability partnership, or limited liability partnership agreement, depending on how your partnership is structured.
Statement of Partnership Authority
A Statement of Partnership Authority is an optional document that makes your partnership official for legal purposes. Although it varies from one state to another, the form will typically ask for details of your business, including the names of all partners, and the names of all partners authorized to transfer any property owned by the business. All partners will sign off on the document and it will be filed by the state, serving as documentation you can call upon if an issue ever arises.
Before you open your doors for business, take the time to have all partners sign a confidentiality agreement. In this agreement, you should outline the date and names of all signing partners and define what “confidential information” means. You should also stress that this confidentiality requirement doesn’t end when the partnership does and state a number of months or years that it remains in effect after the partnership’s termination.
With the right paperwork on file, you can launch your partnership free of concerns about your own liability. It’s also important to have a mediation plan in place, in case you can’t resolve any disputes with the documentation you already have. In many cases, thorough contracts can protect against any unresolvable disputes, but it can always help to have a backup plan in place.