You and your friend (or family member, in-law or even spouse) are so excited about your pending business venture. You’ve spent hours talking about your plans and scouting locations for the perfect spot. You can hardly wait to cut the ribbon and ring up that first sale.

But rein in your expectations just a bit. Before you go a step further, you need to have a legally binding partnership agreement in place.

But I don’t need that with my partner!

Yes, you do. This might not be the way you traditionally did business in the past, or certainly not how your parents or grandparents made their business deals. Back then, a person’s word was their bond and a handshake could seal a deal.

Those days are gone. Savvy business owners demand signed partnership agreements to protect their own interests and those of the company they plan to build. Anything less can leave you wide open to all sorts of unpleasant legal consequences.

What should be covered in your agreement?

One of the most important factors to address is each partner’s commitment to the shared endeavor. For instance, suppose you are putting up the money — a solid investment of $100k. Your partner’s primary contribution will be “sweat equity,” doing the day-to-day work that will get the business off the ground and keep it running smoothly.

Should either of you fail to hold up your ends of the partnership bargain, the business could be doomed before it ever really stood a chance.

Don’t forget to include an exit plan!

Perhaps the second most important point to include in your partnership agreement is how the partnership will be dissolved. Few partnerships are designed to last forever. Partners divorce, die, move away and fall out over any number of differences of opinion. You don’t want to be yoked to this individual forever with no clear path out of the partnership.

Your business law attorney will include an exit clause and the reasons for breaking up the partnership, covering as many contingencies as possible. This is the best way to protect everyone’s interests should the time come to end your business relationship.