One of the best ways to protect your business interests when entering a partnership is to create a partnership agreement that will outline the duties and responsibilities you both have along with the ownership in the business.
Forbes explains that if you make a mistake with your partnership agreement or omit important information that it could lead to arguments or legal battles later as your business grows and changes.
Your agreement should state the contributions each of you will make to the business with details on what you will contribute and how you will make your contributions. For example, if you both put money into the business, then this is a contribution, but what you give to the business may also be non-monetary, such as professional expertise or physical labor. It also covers what you will each do in running the business.
You also need to address your decision-making rights, detailing who can make decisions regarding the daily operation of the business and what happens with large decisions. You want to talk about rights to transfer or share and address issues that might arise if one of you files bankruptcy or gets a divorce. It should also outline what will happen upon the death of a partner.
Your partnership agreement must include details about how you will each earn money from the business and the payment method. For example, will you divide the profits or invest them back into the business? Will you pay yourselves a salary?
You will want to ensure the agreement covers how you will handle issues or disagreements between the two of you.