NFIB

Partnerships Require Specific Contracts, Part I
04/ 01/ 2002

The beginnings of projects are always inspiring. Everything is fresh, the potential is unlimited and future success is seemingly assured. At this stage, it's almost unimaginable how many potential disagreements can arise between partners. Friendships have dissolved and business relationships have shattered simply because all possible contingencies have not been agreed upon in advance. In today's and next week's Workshops, Jeffrey Moses discusses this vital topic.

To avoid conflict down the road, each of the following should be stated in a contract between all partners:

1. The names and addresses of all partners.
2. Division of labor (who does what).
3. Ultimate percentage of ownership for each partner (with ultimate financial earnings dependent on this percentage). Also include whether this percentage can change as the project advances if one collaborator contributes more than expected.
4. Who makes decisions about certain aspects of the project as it progresses.
5. The type of legal relationship exists between collaborators (partnership, joint venture, etc.).
6. Whose name appears first on the credits (if both names will appear).
7. How expenses are divided, and when they will be paid.
8. How disputes will be resolved (mediation, arbitration, etc.).
9. What will happen should one of the collaborators not finish the work.
10. The collaborators' rights of ownership for ensuing projects that are based on the success of the current project.
11. Timetables for achievement of specific stages of the project, including completion.
12. How the contract between collaborators can be amended.

Each of these topics needs to be discussed and agreed upon by both (or all) partners/collaborators in a legally binding contract. If all parties involved have some degree of legal experience, it may not be necessary to have attorneys review the written contract. But if expenses for the project are substantial, and if anticipated earnings are high, each partner needs to hire his or her own attorney to review the final contract.

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