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How well do you trust your business partner?

A lot of people have family members as business partners; sisters, best friends, parents, and as a result automatical ...

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How well do you trust your business partner?

A lot of people have family members as business partners; sisters, best friends, parents, and as a result automatically trust that this person has your best interest at heart. It is quite often not the case.  There have been cases where a family member or a trusted person has jeopardized businesses for selfish reasons and you wouldn’t want to make that same mistake of trusting your business partner on the basis of a relationship.

It is quite pertinent to note that, trusting your business partner, should not prevent you from creating a contract that explicitly details the roles and responsibilities of each partner in the business. Under the law, there is no particular format with which a partnership must be formed, however, both parties need to enter into a written agreement called “Deed of article or partnership”.

There are different types of partnerships and the deed of article should contain, the type of role you want your partner to resume, the agreement on what benefit comes attached with the role, and what happens if your partner decides to stop working with you.

Types of partnerships

There are 2 major types of business partnerships;

  • General Partnership

This partnership involves someone who doesn’t want to participate fully in the business. They can own shares, get monthly allowances but do not necessarily participate in the daily running of the business.

  • Corporate partnership

This is a partnership that involves two or more cooperation's

Content of a Partnership Agreement

A partnership agreement is not complete without the following;

  • The name of the business being formed
  • The parties involved in creating the business
  • The capital percentages to be contributed by each partner
  • How new partners can be introduced
  • Sharing of profit and loss 
  • Management of the firm
  • Accounts and detailed records of the firm
  • Duration and dissolution of the partnership.

In Nigeria, partnerships are regulated by the united kingdom partnership act of 1890. (the English act) and states the following as  legal responsibilities of respective partners

  • Each partner has the right to equally contribute to matters that affect the day to day running of the business
  • Each partner is entitled to share the profits of the business equally regardless of the amount contributed. In the same stead, each partner is jointly liable for losses suffered by the business and can each be sued by a debtor
  • Not all partners will have the authority to manage contracts on behalf of the partnership but every partner will have the ability to bind the entire firm if they have the authority.
  • A partner is not allowed to engage in a competing business to that of the partnership without the consent of his colleagues
  • It is paramount that all partners give full and true information to each other on all matters affecting the firm.

If you are currently in a business partnership with someone and you don’t have the benefits listed above, then you’re definitely not in a business partnership after all. It is quite possible that your partner or the both of you are oblivious of what it takes to create a legally binding partnership and that is okay because it can be remedied. Now is the time to prepare a partnership agreement, stating openly your roles, responsibilities, and profit-sharing. If you bring this up with your partner and he/she refuses to abide by the legally proven way to create partnerships, then, you shouldn’t trust your partner.

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