What Should Be in Your Partnership Agreement

What Should Be in Your Partnership AgreementOne essential business document is a partnership agreement which the importance can be difficult to overemphasize. It is crucial to have a written partnership agreement whether your partner is either a stranger or a lifetime friend when buying a business.

A well-written outline of all rights and responsibilities in the partnership agreement functions as an essential tool for dealing with any disagreements, fights, and various unforeseen issues. You will be able to identify and dispose of a wide range of potential dilemmas or issues before the start of the business with the proper documentation that can be discussed with a business broker.

Determining the Share of Profits, Regular Draw, Contributing Cash and More

Written within the partnership agreement, there should be an outline of each individual partner’s share of profits. Additionally, a partnership agreement should address whether or not each partner gets a regular draw. As this area is where conflicts occurs the most, invest a reasonable amount of time on the partnership agreement that outlines how the money is distributed before buying a business or have a business broker provide help during this process.

One key aspect that is needed to be addressed in the partnership agreement is the matter of who is contributing cash and services to keep the business operational. Furthermore, each partner’s percentage of receives should be clearly indicated in the document.

Partnership Agreements Outline and Prevent Potential Problem Areas

Another sector that causes frequent issues is in the realm of who executed the business decisions after buying a business. Below are just a few types of questions that must be answered:

  • Are business decisions concluded by a majority vote or unanimous vote?
  • What needs to take place in order to consider new partners?
  • Who is handling all managerial work?
  • How is the business going to continue and what changes might occur in the event of a death?
  • At what period would you consider going to court if a conflict cannot be resolved within the groundwork of your partnership agreement?

Getting the business running as soon as possible may be your goal, but not discussing these issues in the beginning stages may spell disaster for the business down the road that can also be easily avoided with the help of a business broker.

The Uniform Partnership Act

Another option to consider, which is offered to all states except Louisiana, is the Uniform Partnership Act or UPA. All legal regulations that specifically apply to any partnerships are within the UPA.

Reduce Conflict Via a Partnership Agreement

While forming a partnership is a fantastic way to launch or buy a business, it is important to keep note that no matter how exciting the process may be it is still a business. Any new businesses can face an assortment of challenges, and the last thing any new business needs is internal disruption. Constructing a list of duties and expectations of all partners within the partnership agreement before buying a business is the easiest and most logical way of reducing any internal conflict within the business so that you may stay concentrated on growing the business and generating money.

Copyright: Business Brokerage Press, Inc.

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