Key Takeaways

  • A sales partnership agreement defines the rights, responsibilities, and expectations of each party in a for-profit business relationship.
  • There are several partnership structures including general, limited, and limited liability partnerships.
  • Strong agreements should address compensation, termination, intellectual property, and authority.
  • Legal review and clear formatting are essential for enforceability.
  • Sales partner agreements often include sections for dispute resolution, confidentiality, and performance metrics.
  • Partner onboarding, exclusivity, and territory rights can impact success and should be clearly outlined.

A sales partner agreement is a contract that exists between multiple business partners and is used to define what the responsibilities of the company are. It also lists the profit and loss distribution for each partner, as well as what the rules are about the partnership in general. When two or more people decide to operate a for-profit business, even if it's just family and friends, they should create a partnership agreement.

Types of Partnership Agreements

There are several types of partnerships available, including the following:

  • General partnership: This is a business structure that has two or more people who decided to partner to form a business that's for-profit. Every partner is liable for the obligations and debts of the business, including the actions of the other partners.
  • Limited partnership: This partnership consists of a minimum of one general partner with unlimited liability in the company, as well as a limited partner who is liable only for their portion of ownership.
  • Limited liability partnership: This type of partnership is where each partner is liable only for their own actions.

How to Create a Sales Partner Agreement

A solid sales partner agreement that is legally binding makes sure there are results from the long-term relationship. This acts to establish a relationship between the organization and the independent sales force. This should define what the nature of the relationship is, as well as express the responsibilities and expectations of either party. The agreement should discuss all compensation timelines and structures, as well as what the agreement termination procedures and terms of engagement are. All authority should be specified and instances defined when the partner needs to talk to the organization before they can take action.

Before everything is finalized, an attorney should look over all the agreements. The sales partner agreement should state which parties are going into the agreement. The document should be in a list format and have a number assigned to every statement. The statement should be titled with a bold font and then list all the details of the statement. Any sub-topics should be put under the main topic, and have every point lettered or numbered with the exception of the bold print. The next topic should have all the responsibilities listed that the organization has in the agreement.

The same section should also have any sales support services the company provides, such as giving out samples of products or sales literature. The next section should have all the responsibilities and expectations of the sales partner. This should talk about expected sales goals, all expenses the partner expects to have without reimbursement, customer qualifications, a policy on how customers are charged, and all services rendered. The compensation plan will outline all revenue sharing, commission, timelines for payment remittance, and fee arrangements. The terms of the contract are listed next and all required rights and actions stated.

Key Clauses in a Sales Partnership Agreement

A comprehensive sales partnership agreement should include the following essential clauses to reduce ambiguity and promote long-term success:

  • Scope of Partnership: Clearly define the nature of the relationship, including whether the agreement is exclusive or non-exclusive, and specify territory rights or restrictions.
  • Authority and Representation: Clarify what authority the sales partner has when acting on behalf of the company and what actions require prior written approval.
  • Intellectual Property (IP) Rights: State whether the sales partner can use the company’s trademarks, marketing materials, or proprietary tools and under what conditions.
  • Confidentiality and Non-Disclosure: Include terms that protect sensitive business information, both during and after the agreement ends.
  • Performance Expectations: Detail benchmarks or KPIs the sales partner is expected to meet, such as sales targets, reporting frequency, and territory development.
  • Compensation and Incentives: Outline commission structures, bonuses, payment schedules, and the process for dispute resolution over compensation.
  • Termination Clause: Define the conditions under which either party can end the agreement and what notice must be given.
  • Non-Compete and Non-Solicitation: Set limitations on the partner’s ability to compete with the business or solicit clients for a defined period after the agreement ends.

Things to Include In a Business Partnership Agreement

Partnership agreements for businesses come in every size and shape. Each business will be different, and the same agreement won't work for a two-owner shop in New York that will work for a four-owner shop in Colorado. Different things will work for those who have partnered together before versus partners who have just met. A business partnership agreement should have the name of the company listed, the name of the parent company if applicable, and any different names the company may operate under. If any fictitious names will be used, this should also be listed here.

The agreement should also list the company's purpose, which should be kept broad. This way there's flexibility to change, and the agreement won't need to be revised every time a new business venture or experiment is tried. There are many responsibilities to decide on, including partnerships with different companies, HR and hiring, the general strategy for the business, financial management, marketing and sales, and day-to-day management.

One partner might be in charge of many different responsibilities, and these can overlap in the day-to-day operations of the business. Some partners are limited partners, while others are considered full partners.

Risk Allocation and Dispute Resolution

A well-drafted sales partnership agreement should also anticipate potential disputes or liabilities. Common provisions include:

  • Indemnification: States which party is responsible if a third-party claim arises due to the actions of the partner.
  • Limitation of Liability: Sets boundaries on how much one party can be held liable for damages.
  • Dispute Resolution Mechanism: Details whether conflicts will be resolved through mediation, arbitration, or court proceedings, and which jurisdiction’s laws apply.

Proactively addressing these elements helps mitigate legal risks and clarifies expectations in the event of disagreement.

Onboarding and Support for Sales Partners

A successful sales partnership often depends on how well the company supports its sales partners. The agreement should outline:

  • Initial Training: Specify whether the company will provide onboarding training, product knowledge sessions, or sales strategy coaching.
  • Ongoing Support: List the types of ongoing support provided, such as CRM access, co-branded marketing materials, lead referrals, or customer service assistance.
  • Resource Access: Define access to tools and platforms needed for the partner to sell effectively and whether any software or subscription costs will be covered.

This section helps foster alignment and ensures that sales partners are equipped to represent the company effectively.

Frequently Asked Questions

  1. What is a sales partnership agreement?
    A sales partnership agreement is a legal document between two or more parties outlining how they will collaborate to sell products or services, including roles, compensation, and legal protections.
  2. Do I need a lawyer to draft a sales partnership agreement?
    While not required, it's highly recommended to have an attorney review or draft the agreement to ensure all legal bases are covered and state laws are followed.
  3. What happens if a sales partner doesn’t meet their targets?
    The agreement can include performance metrics and remedies such as probation, reduced commissions, or termination for underperformance.
  4. Can a sales partnership agreement be exclusive?
    Yes. Agreements can be exclusive, non-exclusive, or limited by territory or product line, depending on the company's sales strategy.
  5. How can disputes between partners be resolved?
    Dispute resolution clauses typically require mediation or arbitration before litigation and specify the governing state law and venue for legal proceedings.

If you need help with a sales partner agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.