What Terms Should Business Partners Include in a Partnership Agreement?

 Posted on August 05, 2021 in Uncategorized

There are multiple types of business contracts that can provide a business and its owners with legal protections and ensure that a company will be able to operate successfully. A well-drafted partnership agreement is one of the most crucial types of contracts for a business since it will define the relationship between business partners and ensure that they fully understand their rights and responsibilities. When creating a partnership agreement, an attorney with experience in business law and contractual issues can make sure the terms of this contract will protect the partners’ rights and meet their ongoing needs.

Terms of a Partnership Agreement

A partnership agreement should address:

• Percentage of ownership - An agreement should fully detail each partner’s stake in the company based on the money or assets they have invested. An agreement should also describe how profits and losses will be allocated between the partners, and these allocations will usually be based on each partner’s ownership percentage. 

• Roles and responsibilities - While each partner’s level of involvement in business operations may have been handled informally in the past, an agreement can help avoid disputes by detailing the responsibilities of each partner. The agreement may also describe the partners’ decision-making procedures, and it may state whether one or more partners will have the authority to enter into contracts or other agreements on behalf of the business.

• Addition of new partners - If new partners or investors will become involved in the business in the future, a partnership agreement can detail the procedures that will be followed, including addressing new partners’ ownership stakes, level of authority, and participation in decision-making.

• Dissolution - Partners may wish to make decisions about how matters will be handled if the partnership ends at some point in the future, including when a partner chooses to withdraw from the business or dies. An agreement can detail a partner’s requirements to sell their share of the business to other partners or any other steps that will be taken by partners in these cases.

• Dispute resolution - An agreement can describe the methods that will be used to resolve any disagreements that may arise between the partners related to the management of the business, allocation of profits and losses, plans for business expansion, or any other business-related concerns. For example, partners may agree that they will use mediation to resolve disputes in certain situations.

Contact Our Glen Ellyn Business Contracts Lawyers

If you need to create a partnership agreement for your business, NN Legal Group can advise you of your rights and options. We will work with you to negotiate and draft an agreement that will ensure that you will be able to operate your business successfully for years to come. Contact our Wheaton business law attorneys at 630-474-0925 to set up a free consultation today.

Sources:

https://www.investopedia.com/ask/answers/041015/which-terms-should-be-included-partnership-agreement.asp

https://www.thebalancesmb.com/what-should-be-included-in-a-partnership-agreement-398879