Going Into a Co-Ownership Agreement? Here’s What Every Business Owner Needs to Know

Co-owning a business can be a smart way to pool skills, share costs, and scale up faster. But with shared ownership comes shared control, and shared risk. That’s why a clear co-ownership agreement is one of the most important things you can put in place before going into business with someone else.

A co-ownership agreement is a legally binding document that outlines how you and your business partners will operate together. It sets the rules around ownership, responsibilities, profit sharing, and what happens if someone wants to leave. Without it, even small misunderstandings can spiral into serious legal and financial headaches.

Define Ownership, Roles, and Responsibilities Early

At the heart of any co-ownership agreement is clarity. It should answer:

• Who owns what? Clearly state how much each partner is contributing, whether it’s cash, assets, IP, or sweat equity.
• What does each partner do? Outline each person’s role in the day-to-day running of the business.
• How are profits and losses shared? Specify how you’ll divide earnings and absorb any losses.

Agreeing on these details upfront helps avoid conflict down the track, and gives everyone a shared understanding of what they’re signing up for.

Get Decision-Making Right From the Start

Equally important is how decisions get made. Does every partner get an equal say? What if one of you owns a larger stake or brings in most of the revenue? And what happens when you disagree?

“Having a process for making decisions and resolving deadlocks is essential,” says Frank Chan, Senior Associate at Corban Revell. “If you don’t agree on how votes work or what happens if you can’t reach a consensus, the whole business can stall at a critical time.”

Well-drafted co-ownership agreements often include processes for voting, mediation or arbitration – tools that protect relationships and avoid expensive legal disputes later on.

Plan for the Unexpected

Too often, people avoid thinking about worst-case scenarios. But what if a partner wants to exit the business, is no longer able to contribute, or passes away?

“A good agreement will include buy-sell clauses or rights of first refusal so you’re not caught off guard,” Frank explains. “It keeps ownership within the trusted group and protects the business from outside interference.”

Understand the Risks and Get the Right Advice

It’s not just about profit. Co-owning a business means you could also be on the hook for debts, liabilities, or legal claims, depending on how your structure is set up. Understanding those risks before you begin is critical.

“Every business is different,” Frank adds. “There’s no one-size-fits-all agreement. Tailoring the document to suit your business model, your goals, and your partners is what makes it work in the long run.”

 

Thinking About Going Into Business With a Partner?

Setting up a clear co-ownership agreement is one of the smartest things you can do. It protects your investment, defines expectations, and gives your partnership the structure it needs to succeed.

Need guidance on a neighbourhood dispute?

Contact Frank Chan.