Business Success with Partnership Agreement
If you are considering starting up a new business partnership, be proactive to ensure success. Before opening the doors to your new business, make sure you have crafted a solid partnership agreement. Creating this agreement right out of the gate may save you headaches down the road. The experienced lawyers at The Casper Firm can help you draft the partnership agreement you need.
What is a Partnership Agreement?
A partnership agreement is a legal document outlining the cornerstones of the partnership. It includes the purposes, responsibilities and protections of the partnership.
Specific Components of Partnership Agreements
Understanding the rights and responsibilities of each person in a business partnership is important to the success of any business. Anyone considering entering a joint business venture should think about what each person's role in the company will be, how the company will be run, and what should happen upon the death of a partner or the dissolution of the company. There are five very explicit areas that should be addressed in any partnership agreement:
- Money: Specifically, who is contributing the start-up cash, and how much money is required? If the initial financial infusion proves to be insufficient, what are the next steps? You should know in advance if you will plan to look for new money sources, or if you will give up on the business after a specified period of time.
- Investment Distributions: At what point will investors begin to reclaim remunerations? Make sure all partners are on the same page on this issue. Is it a priority to pay off debts before collecting distributions? Is building the company of greater importance than a quick recoup of investments? It is critical that everyone understand the long- and short-term goals of the partnership.
- Decision-Making Authority: In a 50-50 partnership, how will disputes be settled? Will the authority rest with the partner whose expertise is required in a particular area? Will the person who contributed the most money to the operation have the ultimate authority to make decisions? This can be one of the most difficult issues in a business partnership. Agreeing in advance to a procedural practice when difficult decisions must be made will save everyone heartache later.
- Death or Disability: In the event that you are no longer able to manage your responsibilities within the business, who will pick up the slack? You may wish to differentiate between financial beneficiaries and decision-making beneficiaries. Consider creating a trust or will that clearly state your wishes, as well as having an insurance policy to potentially pay out your shares, perhaps turning over ownership of those shares to a partner.
- Exit Strategies: Consider the possibility that one or more partners may wish to dissolve the partnership at some time in the future. What are the financial, executive, and practical ramifications of such a move? Whether a partner has other opportunities he wishes to pursue, has simply grown tired of the business, or cannot handle his end of the deal any longer, defining the steps of dissolution can prevent disagreements down the road.
Prepare Your Business Partnership Agreement
Designing a partnership agreement is not a one-size-fits-all proposition. Contact the qualified commercial business legal team at The Casper Firm today to assist you in personalizing a document to meet the needs of your business.