Partnership Purpose Agreement: What You Need to Know as a Business Owner

As a business owner, you may have considered partnering with another company or individual to help grow your business. While partnerships can be beneficial in many ways, it’s important to establish clear goals, responsibilities, and expectations from the outset. This is where a partnership purpose agreement (PPA) comes in.

A PPA is a legally binding document that outlines the purpose, scope, and terms of a partnership. It should include details such as the roles and responsibilities of each partner, how profits and losses will be shared, and the duration of the partnership. It may also include provisions for dispute resolution, termination, and confidentiality.

Here are some key things to consider when creating a PPA:

1. Define the purpose of the partnership

Before entering into any partnership, it’s important to define the purpose and goals of the partnership. This could include things like expanding your customer base, increasing revenue, or accessing new markets. Be clear about what you hope to achieve and what each partner brings to the table.

2. Set clear expectations and responsibilities

It’s important to clearly define the roles and responsibilities of each partner. This includes things like who will be responsible for sales and marketing, operations, and finances. Having clear expectations from the outset can help avoid confusion and conflict down the line.

3. Determine how profits and losses will be shared

Partnerships involve sharing profits and losses, so it’s important to agree on how these will be divided. This could be based on each partner’s contribution to the partnership, or a pre-agreed percentage split.

4. Establish a dispute resolution process

Disputes can arise in any partnership, so it’s important to have a process in place for resolving them. This could involve mediation or arbitration, or a pre-agreed process for resolving disputes.

5. Include provisions for termination and confidentiality

Finally, it’s important to include provisions for terminating the partnership and ensuring confidentiality. This could include things like a notice period for termination, or agreements around how confidential information will be handled.

Overall, a partnership purpose agreement is an important tool for any business owner considering a partnership. By establishing clear goals, responsibilities, and expectations from the outset, you can help ensure a successful partnership that benefits all parties involved.