If you’re starting a partnership, you’re on the right page…
You should definitely NOT start a partnership until you get a Business Partnership Agreement in writing.
A business partnership agreement allows you to structure your relationship with your partner in a way that suits your business.
In your Partnership Agreement, the details of your roles, rights, details of activities of your business, contributions, distribution of profits, and how disputes will be settled, along with other important clauses will be included.
Most contract lawyers work on an hourly basis but I work on a flat-rate basis to draft your Business Partnership Agreement which is more transparent and does not lead to any surprises down the line.
If you’d like to get your Business Partnership Agreement drafted or emailed, email me at firstname.lastname@example.org
What is a Business Partnership Agreement?
A business partnership agreement is an agreement between two or more parties on how to run the business and their various responsibilities/duties.
The concept of a simple partnership agreement is quite easy to understand. But that doesn’t mean it can’t get complex.
That’s why I always recommend coming to a professional like me for help in drafting one for your company. There are lots of different types of partnership agreements besides the simple partnership agreement and if you leave something out, it can be terrible for your business.
Why is a Partnership Agreement So Important?
A partnership agreement or a partnership contract is important because it prevents conflicts and ensures that each partner knows their responsibilities.
Let’s take a closer look at this. Within a general partnership agreement (not to be confused with any specific type), it would state what each partner is responsible for.
It would also detail how decisions are made, capital contributions made to the business, and what each party is entitled to.
By simply referring to the business partnership, contract issues can be resolved before conflicts begin.
Furthermore, clients are guaranteed a far better service because every partner is aware of what their duties are. Responsibilities are easily apportioned and there’s a strong sense of individual accountability.
In short, it’s shocking how any partnership can function without calling a professional to draft a robust agreement for them.
Still trying to determine the importance of even a general partnership agreement?
Shoot your questions over to me at email@example.com
Business Partnership Agreement
A business partnership agreement is ultimately about outlining the contribution of each partner to the business in the form of a business partnership contract.
Contributions come in many forms, but I can sum it up to:
- Any useful specialist skills.
- Capital contributions.
The qualifications they hold qualify them for specific tasks.
These are what make up a partnership between multiple parties. It’s the same with a production partnership as it is with a law firm partnership agreement.
A business partnership contract is also the same between different company types, such as the LLC partnership agreement and the limited partnership agreement. These are the principles that make up any business partnership agreement.
Need help getting started with your business partnership contract? I would love to help! Email me at firstname.lastname@example.org
General Partnership Agreement
A general partnership agreement is made under the assumption that profits and dividends are shared equally between partners. However, unequal distribution is possible in general partnership agreement.
I mentioned that unequal distribution is sometimes used for these types of partnership agreements. The only legal requirement is that within the partnership letter, the percentages must be clearly stated for it to be enforced.
If you still have questions about general partnership agreements, contact me at email@example.com
What Partnership Agreements Should Include
Partnership agreements should include everything from responsibilities, to voting systems, to systems for eventualities like death, disability, and expulsion.
This is where these partnership agreements get complicated. A partnership contract can quickly turn into a short book with more complex companies.
Leaving even a single provision out could cause a lot of problems later. That’s why you should hire a professional like me to help you with preparing a business partnership contract.
So, what should be included?
There are at least seven important things that should be included in any agreement.
- Contributions – The business partnership agreement definition states that every partner will contribute something and will be responsible for the ongoing financial needs of the company. Spell this out, including if you have a silent partner agreement in place.
- Distributions – At the other end of the spectrum, you have the distributions in profits and dividends. Do you want a profit sharing agreement or something else?
- Ownership – What will an owner take with them if they decide to leave? Describe the scenarios of bankruptcy, major illness, and death.
- Making Decisions – How will decisions be made? Will you have a voting system, and if so, what kind of voting system?
- Dispute Resolution – Disagreements between partners happen, but you don’t want it to get out of control. Make it clear that there’s a system in place for dispute resolution.
- Handling Major Changes – Outline what you will do in scenarios like: the death of a partner, retirement of a partner, a buyout, and making changes to the business partnership agreement.
- Dissolution – If the partnership fails, you need to determine what happens then. This could make up most of your business partnership agreement.
How to Write a Business Partnership Agreement
There are templates available for writing partnership agreements. I highly recommend that you get the help of a professional, though.
The problem with many of these templates for a domestic partnership agreement or a silent partner agreement is that they simply don’t cover all the bases. They don’t cover the nuances of your business.
Unless you’re an expert, make sure that you hire a professional for preparing your business partnership contract. I have helped hundreds of companies draft partnership agreements that are specific to their companies and the way they want to run things.
This is not something to skip over or be cheap about.
Contact me at firstname.lastname@example.org to get started with creating your business partnership agreement today!
How Much Does a Simple Partnership Agreement Cost?
It depends entirely on your business. The drafting costs and any additional fees will vary so it’s impossible to put an exact figure on it.
It’s not going to be a major business expense, so you shouldn’t think twice about hiring an expert to draft a business partnership contract and a partnership dissolution agreement for you.
It’s more than worth what you’ll pay for the draft of the partnership contract.
Never establish a partnership without drafting a contract between business partners first.
I can provide you with your free and no obligation partnership agreement quote. Send me a message at email@example.com to get started.
Partnership Agreement Definition
The partnership agreement definition is simple. Any agreement is ultimately a contract between business partners (two partners or more) on the terms and conditions of their business relationship, as well as how the business is run.
It’s true that not all partnership agreements are the same. A business partnership contract can be as simple or as complex as you want it to be.
It’s always going to differ depending on the business. For example, a law firm partnership agreement may contain clauses not found within a real estate partnership agreement.
Don’t fall into a false sense of security because of how simple the definition is.
Why a Business Partnership Agreement is Necessary
A formal contract between business partners is essential to prevent conflict and to outline the responsibilities and systems of the business.
Disagreements are common and if there’s no formalized system in place, it will become extremely difficult to resolve those disagreements. You need to have these systems available for the protection of the rights of partners.
It’s not a legal requirement to have one, but if you want informal agreements to be honored, they must be written down so they can be referred to.
If disagreements become critical, your LLC partnership agreement could be used in a court case.
Why Should I Have a Partnership Agreement?
There are also many benefits when it comes to tax practices, liability issues, and for the changes the business may go through.
Here are the main reasons why you might need a comprehensive partnership agreement contract:
- To avoid tax disputes with the IRS through having the business’s tax requirements clearly spelled out.
- To make it clear who’s liable for which parts of the business.
- To handle major changes to the business, such as new partners and departing partners.
These are just some of the reasons why you should consider a formal partnership letter crucial.
If you’re still not sure why you should have a business partnership agreement and how to write a partnership agreement, reach out to me at firstname.lastname@example.org.
Why Should a Partnership Agreement Be in Writing?
You must write down any agreement so it can be referred to during times of disagreement. It’s also a legally binding document.
Not a lot of people know that even a simple partnership agreement is a legally binding document. In major disputes, it can be used to prove a case in court.
Even a simple partnership agreement uses extremely specific language and ensures that everyone is aware of their responsibilities and the way the business operates. It also makes sure that everyone understands everything.
That isn’t necessarily the case when having an informal conversation between partners.
Law Firm Partnership Agreement
A law firm partnership agreement must include additional clauses to cover the nature of the work. You won’t necessarily find these clauses in other agreements.
Why did I mention this specific type of agreement?
Law firms are in an area, like doctors, where the level of liability is high. That means these agreements must be even more specific because they must spell out the exact responsibilities of every partner.
In a sector where professional liability cases are in abundance, partnership agreements like these must lay down the duties for each partner even more clearly.
For these types of agreements, I would say it’s essential to employ a professional to create a draft. Don’t use a standard template to prepare a contract between business partners.
I have years of experience with creating law firm partnership agreements and I’m just an email away at email@example.com.
LLC Partnership Agreement
The LLC partnership agreement is even more complex than a general partnership agreement. It alters the way liability and input works.
The key difference is that partners can avoid assuming full liability for the business’s activities. They can also have limited input in management decisions.
Short-term investors often choose these agreements simply because the more they invest, the more input they can have.
Again, these agreements are complex and you should employ a professional to help draft one of them.
I can help you get started on your LLC partnership agreement today. Send me a message at firstname.lastname@example.org
Limited Partnership Agreement
A limited partnership agreement is almost the same as a general partnership agreement. The difference is that they combine the advantages of a general partnership and LLC partnership.
So how does this work?
There must be at least one general partner and one limited partner. The general partner has both investment and management control.
A limited partner, however, may have limited management control and limited access to distributions.
For example, an investor who owns shares in Disney is a limited partner. They gain dividends but they don’t have any input in the direction of the company.
If you still have questions about limited partnership agreements and general partnership agreement, feel free to send them my way at email@example.com
Real Estate Partnership Agreement
A real estate partnership agreement is another complex partnership agreement type. They come with additional responsibilities and liabilities.
Since there are so many areas of real estate where partners could become liable, this can get complicated fast. That’s why you should get a real estate partnership agreement prepared by a professional lawyer.
It also depends on the type of real estate activities you’re involved in. It must cover any development, distribution of profits, and who puts up the capital.
Again, I would recommend hiring a professional to help with a real estate partnership agreement.
I’m just an email away at firstname.lastname@example.org if you need help drafting your real estate partnership agreement.
Profit Sharing Agreement
A profit sharing agreement could be applied to any type of business. It allocates both profits and losses in a specific way.
Most agreements with partners involve simply distributing profits and losses equally. This is known as a general partnership agreement.
But for companies that prefer to distribute profits and losses unequally, a profit sharing agreement will be used.
How might this work?
Let’s say you have a real estate company. There are three partners involved. One partner delivers most of the money, so a profit sharing option must be used.
In this case, the biggest investor may receive 50% of the profit, the second gets 30%, and the third gets 20%. This would also be the ratio with any losses.
I’ll help you get your profit sharing agreement right the first time. Message me at email@example.com for assistance.
Silent Partner Agreement
A silent partner agreement is designed for companies where some partners provide capital without involving themselves in management or day-to-day operations.
Silent partners are present when they wish to invest in a company but may bring no specific skills to the table. For example, an investor in a sports team may be a silent partner if they have no branding, coaching, or playing skills.
They can still make money and they can still occasionally put forward their opinions, but they generally stay out of affairs.
To compensate for this, they may receive a greater share of the profits, but that depends on the company.
I can help you with your silent partner agreement. All you have to do is shoot me a message at firstname.lastname@example.org
Domestic Partnership Agreement
A domestic partnership agreement is an agreement between couples. It reveals the responsibilities when it comes to financial affairs and business ownership.
Another important point regarding this partnership agreement is that it details how various assets and managerial positions are distributed in the event the couple breaks up.
It’s easy for this to be confused with a marriage contract, but it’s not the same thing. It’s simply a document that details which party is responsible for what.
Still have questions about domestic partnership agreements or need help creating one? Send me an email at email@example.com
Partnership Buyout Agreement
The partnership buyout agreement stipulates what happens if the business is sold or an owner’s stake is bought out by a third-party.
Disputes between parties when a sale is about to happen is one of the most common reasons why business relationships break down. The partnership buyout agreement ensures that an owner can sell their interest without causing problems for the remaining partners.
It should stipulate:
- When an owner can sell their stake.
- The third-party who can buy their stake.
- Any valuation methods used to determine how much their stake is worth.
You also should include whether a departing partner must be bought out before they can terminate their business relationship.
I strongly advise that you seek help from a professional to avoid problems later.
You can reach me at firstname.lastname@example.org for any questions related to drafting a partnership buyout agreement.
Partnership Agreement in California
California law stipulates that no written agreement is required, but without a formal agreement, any disputes will revert to the Revised Uniform Partnership Act (RUPA)
What this means is that in the event of a dispute, all partners will be considered equal. Did you have a 70-30 split? Then that’s too bad.
The two partners would have a 50-50 split under California law. And there’s nothing you can do about it.
States like California illustrate why you absolutely must have a written agreement in place. Just because it’s not the law, it doesn’t mean that a partnership agreement California isn’t essential for the running a partnership.
Feel free to email me at email@example.com for help with your partnership agreement in California.
Partnership Dissolution Agreement
Your partnership dissolution agreement is not part of your partnership agreement detailed above. It’s the document you sign when you choose to dissolve your partnership.
Take note that your partnership isn’t dissolved the moment you sign this agreement. Your business must settle its debts, distribute its assets according to the partnership agreement, and be terminated as a business entity.
This agreement will determine what the process is and how the various profits and losses are distributed for the final time. Many companies also choose to have a dissolution agreement that acknowledges the current obligations it has to its clients.
How to Dissolve a Partnership Agreement
The process depends on the state. You must fill in the required forms and then handle your business according to your original business partnership agreement.
To start with, you should visit your state’s website and figure out what the formal process is. You then need to fill in the required state forms. It can take six months for the partnership to be formally removed from the books.
Your original agreement will prove useful here because it will already reveal how the business must be dissolved.
This is why I always say that you should hire a professional to help you with this part of your business partnership agreement. Even a single missed point can lead to a lot of conflict further down the line.
You should definitely not start a partnership until you get a Business Partnership Agreement in writing.
A Business Partnership Agreement specifies your roles, rights, details of activities of your business, contributions, distribution of profits, and how disputes will be settled, along with other important clauses will be included.
If you’d like to get your Business Partnership Agreement drafted or emailed, send me an email at firstname.lastname@example.org