Clauses to Include In Your Partnership Agreement
Southern California business attorneys can provide assistance with writing a partnership agreement if you are planning on going into business with others. Pooling your talents can be a great way to share the risk and build a stronger business, but there could also be potential downsides to working with others on business endeavors. You can minimize the downsides, protect your interests, and maximize your chances of business success if you create a comprehensive partnership agreement.
Knowing what to include in your partnership agreement can be tricky because you want to ensure that your contract is as detailed and complete as possible. No two partnerships are the same and your business ideas are uniquely yours, so you should have a contract that reflects who you and your partners are and how your company will operate.
Brown & Charbonneau, LLP can help you to draft an agreement that is designed to meet your needs and protect you and your new enterprise. Give us a call today to find out more about how we can assist you with drafting a partnership agreement that works for you.
Clauses to Include in a Partnership Agreement
When you create a partnership agreement, you want clauses that protect your investment and secure your place within your company. There are lots of different kinds of clauses to include, and making a comprehensive agreement requires legal knowledge applied to your business situation. This is why having a lawyer helping you is so important.
Although there is no substitute for personalized advice and an agreement tailored to fit your needs, the Small Business Administration has provided information on some basics of partnership agreements. The SBA identified six key clauses that you should include in partnership agreements including clauses related to:
- Percentage of ownership: It is vital that everyone agrees on the percent of the partnership that each person owns. Your records should also detail the contributions each partner made when the company was started, as these details can be used to help calculate ownership percentage.
- Profit and loss allocation: Your partnership agreement should specify how profits and losses are divided up. Does each person take a proportional share based on their initial contributions or is there another formula you’d prefer to use?
- Who is able to bind the partnership: The default is generally that any partner can bind the partnership. This means any partner can commit to legal obligations, which the whole partnership can then become responsible for fulfilling.
- How will decisions be made: You should outline the process to be used to make important decisions. Often, it is best to try to split up final decision-making authority among the partners. If you have too many people making decisions on every issue, this is a recipe for conflict and chaos and could result in nothing getting accomplished.
- What will happen if a partner dies or must leave the company for other reasons: Do you want that partner to be able to transfer his ownership interest in the partner to a person of his choosing or do you want first rights to your partner’s share of the company? You should address the possibility of a partner departing when you start your partnership, because everyone is on good terms and can compromise more easily. In addition, if you’re negotiating what happens when a partner must leave and you have no way of knowing who could eventually be forced to step away from the partnership, you’re more likely to negotiate fairly since you never know if you’ll be the first to have to step away.
- How will disagreements be resolved: It is imperative that you specify what should happen to resolve disagreements that inevitably will arise. Ideally, you can keep serious conflict to a minimum by delegating decision-making authority to different people for different aspects of business operations. If and when conflicts happen, though, you need a way to resolve them amicably. Your partnership agreement should spell this dispute resolution plan out so everyone is on the same page and you’re less likely to end up in a conflict that you must go to court to resolve.
Getting Help from Southern California Business Attorneys
Brown & Charbonneau, LLP has helped many companies throughout California to create partnership agreements that set the stage for business success. Our legal team can help you through all phases of creating your agreement, from negotiating to drafting your agreement to understanding your rights and obligations when the contract is signed.
To find out more and to get personalized advice on the legal issues that matter to you and your new partnership, give us a call at (866)237-8129 or contact us online today to talk with our experienced business attorneys.