Partner agreement. How to settle things upfront, not in court

I have seen dozens of partnerships that fell apart not because of the market and not because of competitors. They collapsed because of silence. Two or three people decided to do business together, shook hands, registered a company – and never once sat down to honestly discuss who brings what, who owns the brand, and what happens if one of us wants to leave.

Company registration is just a piece of paper. The real agreement happens earlier: when there is still no charter, no office, not even a name registered to anyone. Exactly at this moment you should close two documents that later save partnerships and money – a partner agreement and, if an external investor comes into the business, a SAFE.

Partner agreement: the rules of the game before the game starts

A partner agreement is not a legal formality for the record. It is an honest conversation translated into text. And it must contain answers to five questions that partners usually avoid, because they are uncomfortable.

Where we are going. Before splitting percentages, it is worth checking whether the partners even see the same future. One wants a stable profitable business for years to come. Another wants fast growth and an exit in three years. Both options are fine. What is not fine is discovering the difference after a year of working together. One wants a company No. 1 in Ukraine and Europe, and the other wants a car and a house, and so on.

Who brings what. Money, idea, time, expertise, contacts, reputation – all of these are different currencies, and partners rarely contribute the same amount in the same form. Record this honestly: who invests how much cash, who dedicates how many hours per week to operations, how a non‑cash contribution is converted into an equity stake. Without this rule, there will always be a partner who feels they work for two but are paid as for one.

Who owns the brand. At the start, one person – most often the most “hands‑on” or the most driven – registers the trademark, domain, copyrights to the code or design. Simply because they had time to do it. And formally these assets become their personal property, even though everyone contributed. The rule is simple: everything created for the business must belong to the business from day one, not to the person who first hit the registration button.

How profit is shared – and who bears losses. This is not one conversation but two. It is easy for partners to agree how to split the money when it already exists. They almost never agree who covers the cash gap when there is no money yet. And each has a different view on how to withdraw previous assets if the business does not take off.

What happens if someone leaves. This is the most important and most commonly omitted clause. Partnerships end: burnout, shifting priorities, personal circumstances. The question is not whether a breakup will happen, but whether there is a scenario for that case. Is the share of the departing partner bought out, and according to what formula. Is there vesting – a mechanism under which the share vests gradually rather than being granted in full at once, so that a partner who leaves after two months does not own one third of the company forever.

If you have any questions or issues, please contact our lawyers for individual consultation and professional legal assistance.

Author: Ihor Yasko, managing partner of Attorneys Union “Law Company ‘WINNER’”, PhD in Law.