Having a well-written partnership agreement is always advisable

The Business Insider recently offered some suggestions on how to get a new business off to a good start. First, spend money frugally and keep your overhead as low as possible in order to avoid misallocating resources. Second, design the operational aspects of your business to be as efficient and as streamlined as possible so you can focus your attentions primarily on building a positive cash flow. Third, determine the type of person you want to have as a customer so that you can gear your marketing efforts toward cultivating them. Finally, if you are going to enter into a business partnership, be extremely careful whom you select as a partner.

The N.Y. State Department of State notes that a general partnership is one of the business entity forms commonly used in this state. Like any other business entity choice, a partnership has its advantages and its disadvantages. One positive advantage is that two (or more) heads can often be better than one. Two or more partners can sometimes achieve better results working together than they could have achieved working by themselves. As observed by former Walt Disney Company CEO Michael Eisner in the Huffington Post, a successful partnership allows you to identify your own flaws and rely on your partner's assets "without being uncomfortable about that vulnerability."

Business partners should be those with distinct talents who can complement each other and make the running of a business more efficient and more profitable than the typical sole proprietorship. In selecting one or more business partners, it is imperative that you need to choose people on whom you believe that you can trust and depend. Selecting savvy partners who already have ample business experience is a considerable plus. While you do not have to choose best friends as partners, there is an obvious need to select as partners people that you believe that you can get along with on a professional level.

Partnership agreement

The CBS News website has noted that one of the biggest mistakes that any business partnership makes is not clearly "laying out" the terms and conditions of the partnership before going into business. Having a written partnership agreement setting forth how the business will be operated minimizes the chances for subsequent disagreements that can threaten the existence of the business and place at risk each partner's financial stake therein. The partnership agreement offers an excellent opportunity to put in writing all prior verbal understandings of the prospective partners.

A partnership agreement should record what is being contributed to the business by the various partners such as property, services or cash. In addition, the agreement should set forth the ownership percentage each partner will have in the business and, importantly, how profits and losses will be allocated. Among other things, a partnership agreement should always contain an exit clause, in the form of a buy-sell agreement, since it can be anticipated that one or more partners will leave the business at some point. The exit clause should be written to give the remaining partners the right to buy out, at a price determined by a formula, the exiting partner's share of the business.

Seek legal assistance

If you are contemplating entering into a business partnership, you should contact a New York attorney experienced in business formation. The attorney can draft a partnership agreement which is aimed at protecting the financial interests of the prospective business partners.