Starting a business with your family can be amazing, and amazingly difficult. Only one in three family businesses survive to the next generation. With those statistics, it is crucial to give your business every chance to succeed. Although you are not required by Texas law to have a written partnership agreement, drafting and signing one can give you and your partner invaluable parameters for operating your business.
The state of Texas considers any two or more individuals who join together to do business for profit to be in a partnership. While the state allows you to reach a nonverbal agreement with your business partner before launching your company, keep in mind that it will be his or her word against yours if you find yourselves in a court of law over a dispute. A written partnership agreement also allows you to supersede a number of default rules placed on partnerships operating without an official agreement in Texas.
Although a partnership agreement can include a number of items, some elements you may want to consider are:
- Your partnership’s name
- What each partner will contribute, and each partner’s ownership percentage
- How you will divide profits and losses
- Who can do what, or what authority each partner will possess
- What decision-making processes will look like (e.g., partner votes, etc.)
- How you might admit new partners in the future
- What you will do if a partner withdraws from the business or passes away
- How you plan to settle conflict
If you are planning to start a partnership with a family member, a knowledgeable Houston business lawyer can help make sure you have addressed any potential issues and that you have done everything possible to be set up for success. I have more than 28 years of experience in providing legal assistance for business formations and business counseling. I work with my clients one-on-one, offering practical solutions that help them reach positive results. Contact Patricia M. Davis, Attorney at Law today to schedule an initial consultation and start your business off right.