Before You Sign a Partnership Agreement: A Founder's Legal Checklist

Partnerships fail for the same reason marriages do: everyone's optimistic at the start, so no one wants to talk about what happens if it goes wrong. Then it goes wrong, and there's nothing written down.

A good partnership agreement isn't a sign of distrust. It's the opposite, it's how two people who trust each other protect that trust from the pressure of money, time, and change. Work through this checklist before you sign.

1. Ownership and equity

• Who owns what percentage, and why? Tie equity to contribution and role, not a reflexive 50/50.
• Vesting. Does equity vest over time? A standard four-year vest with a one-year cliff protects everyone if someone leaves early.
• What happens to a departing partner's equity? Decide now, in writing.

2. Decision-making

• Who decides what? Define which decisions need consensus and which one partner can make alone.
• Deadlocks. When two partners disagree and can't move, what breaks the tie? A deadlock provision prevents a frozen company.

3. Money

• Capital contributions. Who's putting in what, and what happens if more is needed later?
• Draws and distributions. How and when does money come out?
• Debts and personal guarantees. Know exactly what you're each personally on the hook for.

4. Intellectual property

• Assign the IP to the entity. The company, not an individual partner, should own the core intellectual property. This is one of the most common and most expensive things founders get wrong.
• Pre-existing IP. Clarify what each partner brings in versus what the company owns.

5. The exit, the most important part

• Voluntary exit. How does a partner leave, and how are they bought out?
• Involuntary events. Death, disability, or a partner who simply stops showing up, address each one.
• Buy-sell provisions. How is the business valued, and who has the right to buy?
• Dissolution. If you wind the whole thing down, how are assets and liabilities split?

The principle

The best time to decide how a partnership ends is before it begins, while you still like each other and no money is on the line. Everything you settle now is a fight you don't have later.

You don't have to draft this from scratch. If you want attorney-drafted templates and guidance built for founders, see the resources. And if the stakes are high enough that you want a strategist in your corner, that's what a strategy call is for.

First, though, grab the free guide so you know what to look for in any agreement: 5 Clauses You Should Never Sign Without Negotiating.