Written partnership agreements help partners avoid disputes and conflicts that could otherwise end the business. The Partnership Agreement should describe the rights, obligations and obligations of the partners. The agreement acts as an authoritative document of the partnership. Without a written partnership agreement, a partnership must comply with the standard rules of the state. A partnership agreement must include the name and location of the business, as well as the purpose of the company`s creation. It`s pretty simple. You must provide the legal name of your partnership, any fictitious company name/DBA under which you operate and the business address. If your business has multiple locations, list all locations and identify the head office. This is perhaps the most important section of your partnership agreement. Here you present the participation of each partner in the company and its profit shares.
These can, but do not necessarily have to be, the same. For example, a partner can contribute up to 70% of a company`s resources. Another partner can only contribute up to 30% of a company`s resources, but brings with it most of the knowledge and skills of the market. In this case, the partners might find it fair to establish a roughly equal distribution of profits. When you start doing business with other people, the hope is that you will always work well together as a team. However, this is not always the case. A key to protecting any type of business unit is a strong founder`s agreement. Don`t forget to include the name and address of each partner in your contract. You must also indicate the capital contributions of each partner, both the type of contributions (i.e. money, property, labour, etc.) and their value. If you have an LP, identify which partners are limited partners and which partners are general partners.
There are many reasons why partners may disagree with each other. If you`re starting a business with a friend or family member, you may find that your personalities collide as a business partner. A partner cannot use its full weight in the exercise of its commercial responsibilities. It is also common for feelings of resentment to arise when one partner contributes most of the money to the partnership while the other contributes to the work, also known as “welding justice.” If something happens to a partner, if there is a dispute between the partners or if there is a change in the partnership, everyone needs to know “what if”. A partnership agreement is the best way to ensure that the commercial – and personal – part of the relationship can survive. If you would like our office to prepare a well-written partnership agreement for your California business, please call 818-849-5206. On the other hand, if you would like to discuss the business unit (corporation, limited liability company, partnership or sole proprietorship) that best suits your needs, please arrange a cost-effective 30-minute telephone consultation. A partnership agreement must be prepared when you start a partnership. A lawyer should help you with the partnership agreement to ensure that you include all important “what if” issues and avoid problems when the partnership ends. After all, you need to decide on the reasons for the dissolution of the company, although this is of course not an issue that the partners like to discuss. If a certain number of partners leave the company, will it dissolve the company? Do all partners have to agree to the dissolution or is a majority decision sufficient? This is an important section of your partnership agreement.
Equal share of profits and losses. If a partnership is formed either without a written partnership agreement or with a partnership agreement that deals with profit sharing, RUPA provides that each partner is entitled to an equal share of the profits. There are no formalities for a business relationship to become a general partnership. This means that you don`t have to have anything in writing to form a partnership. The key factors are that two or more people continue to be co-owners and share the profits. Even if you do not intend to be a partnership, if you present yourself to the public in this way, your relationship will be considered a partnership and all partners will be responsible for the company`s obligations (see liability issues below). .