What Is A Partnership Agreement? Let’s say you’re about to start a business with someone you know and trust. Perhaps a close personal friend, or an associate you’ve worked with many times in the past. In any case, the outlook looks good. You have a common goal set, and one or two ideas of how it might work. Seems like it’s all green lights from here. Stop. Fast-forward five years down the road. Everything is in turmoil. Your business is failing because of a fatal error, and you’ve nothing to do but blame one another. Worse, you have no contingency plan. This nightmare scenario is the while reason partnership agreements exist. A partnership agreement is, essentially, a legal document laying out the tenets of a business partnership. These rules apply to all important partnership divisions, including the division of assets, the division of labor and the division of profits. There should also be rote procedures laid out for what to do if a partner dies, joins or wants out. Most of the time a partner will need to buy out his or her share, and you will need to state exactly how the value and prices of your business will be determined. Moreover, you’ll want to figure out liability. A General Partnership, which is the default partnership format in the eyes of the law, ascribes equal liability to all members. However, in the case of a Limited Partnership or, as is more popular these days, a Limited Liability Partnership, some members escape a certain amount of liability or avoid it altogether. If you or any of your partners wants to gear liability arrangements in your favor, you’ll want to write this out in the partnership agreement. In short, you’ll want to outline everything that is important to you in your partnership agreement, whether it’s your method for dividing your hard-won loot or the brand of crackers served at meetings. Drawing up a partnership agreement is a relatively simple process. The steps are as follows – 1.) Sit down with your partner or partners and figure out how you want your partnership to work. 2.) Write down all the details. 3.) Go on the web, find a free partnership agreement template and plug in your information. Trust me, this is a whole lot easier than writing one from scratch as the prompts of a template make it less easy to forget things. 4.) Treat yourself and your partners to martinis. You are in business!
Posted on: Thu, 05 Jun 2014 04:47:41 +0000
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