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When things turn sour in a business partnership … it’s crucial to have the appropriate paperwork in place

In early 2009 Jill and her two neighbours in her apartment complex decided to go into a business partnership together. The three friends had worked well together on the Body Corporate committee for years so decided that entering into business together was a good idea. They verbally agreed that Jill would provide the $10,000 start up cash they required, and the profit would be split 50% to Jill and 25% each to her two friends. This seemed fair, as Jill was taking the risk of putting her own money into the business.

By the end of 2010 the business was a great success, and Jill had easily recouped her $10,000. However things between the business partners became more and more strained, and her neighbours claimed they were actually owed one third of the profits each.

Because they had no written partnership agreement the situation became very difficult. It was Jill’s word against her business partners.

It is very important to have a written partnership agreement when going into business. A written partnership agreement ensures that you and your business partners have to stick to what is initially agreed. It outlines the specifics of the partnership, such as division of profit and ownership of assets, before disputes arise, and provides the rules for working in business together.