5 Common Mistakes to Avoid When Drafting a Business Partnership Agreement

Starting a business partnership is a significant milestone in every entrepreneur’s journey. However, drafting a business partnership agreement can be tricky. It requires careful planning and execution to ensure that both parties are satisfied with the terms and conditions.

Here are five common mistakes to avoid when drafting a business partnership agreement:

1. Lack of Clarity

One of the most significant mistakes that small business owners make when drafting a partnership agreement is a lack of clarity. A partnership agreement must be written in simple language, and both parties must understand its terms and conditions. Lack of clarity can lead to misunderstandings and disputes down the line.

One way to avoid this mistake is to involve a legal professional who can guide you through the drafting process. An attorney can help you use clear and concise language, define terms, and ensure that both parties’ intentions are captured in the agreement.

2. Failing to Cover All the Relevant Issues

Another common mistake is failing to cover all the relevant issues in the partnership agreement. A partnership agreement should be comprehensive, including all the crucial issues that may arise in the future. Such issues may include responsibilities, compensation, financial matters, decision-making, dispute resolution, and liability protection, among others.

Failing to address any possible issues in the partnership agreement can lead to misunderstandings and conflicts later on. It is essential to take the time to identify all the relevant issues and include them in the agreement before signing.

3. Unequal Distribution of Responsibilities

Partnerships require each partner to contribute to the business’s success. One of the most significant mistakes business owners make is failing to distribute responsibilities evenly. For example, one partner may end up taking on more work or more significant responsibilities, leading to resentment and conflict.

It is crucial to allocate responsibilities based on each partner’s skills, experience, and strengths. Partners should also discuss how to handle tasks that may not fall under either partner’s strengths, such as marketing, accounting, or HR.

4. Lack of Contingency Plans

Business partnerships can be unpredictable, and having contingency plans in place is crucial to ensure the partnership’s long-term success. Failing to develop contingency plans for possible scenarios such as bankruptcy, disability, or death can lead to potential disputes and the collapse of the partnership.

Contingency plans should clearly stipulate the procedures to follow in the case of unforeseen circumstances. The agreement should also specify how to handle assets and liabilities should circumstances change.

5. Ignoring State Laws

Business partnership laws vary from state to state. Ignoring state laws when drafting a partnership agreement is a significant mistake that can lead to legal repercussions in the future. Failing to pay attention to the legal requirements in your state can lead to invalid agreements that do not hold up in court.

Partnering with legal professionals is an excellent way to ensure that your agreement complies with state business laws. Legal professionals have the experience and knowledge to guide you through these procedures, ensuring that both parties adhere to the state laws.


The above mistakes are common among most small business owners when drafting partnership agreements. However, by avoiding them and seeking professional legal advice, both parties can create an agreement that is fair, clear, and comprehensive for their business. Taking the time to draft a robust partnership agreement is a crucial step in establishing a long-lasting and successful business partnership.