Elves in Enterprise: Crafting the Perfect Partnership
Commercial team |11 December 2023
Buddy had always fancied himself as an entrepreneurial elf. He had left the North Pole in search of greater business opportunities and now felt like this was the best time to give it a go. With the help of his best friend, Chip, a neighboring elf who was equally as driven, Buddy began planning their business idea.
It was simple: Santa’s workshop had been struggling with the demand for years now, with Santa forced to import more and more toys from factories. Buddy and Chip knew how they could help: they were going to open an additional workshop to make presents and support demand while creating more job opportunities for elves.
Buddy and Chip knew their friendship was strong, but to make their business venture successful, they needed more than just holiday spirit. They needed a solid foundation to start their entrepreneurial journey. This led them to the concept of a Partnership Agreement.
A Partnership Agreement is a document outlining how the business partnership will work, including roles and responsibilities, decision-making, required investments and how profits and losses are shared. The agreement would provide them with clarity and flexibility to make their own bespoke arrangements by diverging from the standard rules in the Partnership Act 1980. Buddy was a natural toy-maker who would oversee production, while Chip was a mathematical whizz who would manage the finances. Both knew what was expected of each other but setting this out in their agreement would reduce the scope for argument later on if things soured between them.
Their agreement covered the finances of the business, including how it would be funded, how profits would be divided and how expenses would be handled. This would keep things well-organised and running smoothly.
Decision-making and dispute resolution were also crucial. They agreed how decisions would be made and how disagreements would be resolved. Buddy and Chip considered the risks involved in their venture, how they could protect themselves and who would be responsible for various areas of risk management.
Succession planning was the final consideration: what would happen if, in the future, one of them decided to take a step back or slipped on ice and could not work in the business for a while. or sadly passed away? Both Buddy and Chip knew that without the agreement, they could not easily be forced to leave or take a smaller share of the profits if they were not involved, or be required to be bought out over an affordable period of time. This meant that the whole business might have to close overnight if they could not sort things out between them or with their executors. They could not bear the thought of all those unhappy children as a result.
Finally, they had to make sure their agreement was compliant to ensure the business would be built on strong, legal foundations.
Buddy and Chip’s Partnership Agreement provided them with additional value as it gave them clarity, security and a clear path to ensure their business venture had the potential to be successful.
If you’d like to discuss how a Partnership Agreement could provide harmony and partnership within your business, you can speak to our expert Commercial team here.
