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Why vacation time should be included in a partnership agreement

On Behalf of | Jan 10, 2024 | Business Formation |

If you’re starting a business partnership, it is important to have a partnership agreement in place first. This can help to define some key areas, such as the roles you and your business partner will have, how much money you earn, your ownership percentages, dispute resolution tactics and much more.

But there are some business owners who, even when they do create this document, fail to address key areas. They may think something like vacation time isn’t as important and doesn’t need to be included in the agreement. But the reality is that it could be beneficial to iron out as many details as possible in advance.

Preventing future conflicts

The benefit is that this can prevent disagreements or conflicts in the future, when emotions are running higher.

For example, perhaps two business partners split their earnings 50-50, and they both expect to contribute half of the work. Over a six-month period, one person is at work every day. But the other person misses 20% of their days, taking various trips and vacations. This can naturally make the person who is still working every day feel resentful because they are clearly putting in more effort – but still receiving the same amount of compensation.

But that’s not to say that business partners can never take a vacation. It just reduces any of this resentment or conflict if they agree up front about how much vacation time they get, how to use it and how the business will operate in their absence.

Are you considering drafting a partnership agreement? Be sure you know exactly what legal steps to take.