Partnership Agreements: What You Need To Know
A Partnership Agreement is an agreement between parties to provide for the terms of a business partnership between partners. Could be more than two. The agreement would typically govern capital contributions, management of the business venture, distribution of profits between partners and loss.
I ALWAYS recommend and encourage clients to put any commitment in writing. Colloquially, “talk is cheap”. However, when parties put commitments and promises in writing, then sign it, you have your evidence at the tip of your fingers. Although a valid contract may be oral, it is very challenging to prove. As a lawyer, I would happily take on the challenge and help you win, but it will cost clients significantly more to prove the actual terms of an oral agreement than a written one. A lot of investigative work and inferences would need to be made to prove oral terms.
Business commitments are serious and I do not recommend taking partnership agreements lightly.
By far the most important term, among others of course, is the termination of the partnership. Will it be a fixed date? Or upon the satisfaction of a condition?
How will you dissolve the Partnership? There must be an exit strategy. I recommend providing for a notice period and specifying whether the withdrawal of a particular partner would cause the partnership to dissolve.
What will be the value of each partner’s contribution? Will profits be distributed accordingly?
MEETINGS & VOTES
Partners may meet on a weekly, monthly, quarterly or annually basis depending on business activity.
Will votes be decided by majority or unanimously? Which topics specifically?
Does the partnership terms allow for new partners? What will be the conditions?
All of these terms must be discussed with a lawyer to ensure that you are protected and avoid pitfalls.
Although these are common terms, there is no one-size fits all for agreements. Often, clients expect standardized templates to meet their needs, however the generalization in these agreements often cause more trouble than anticipated when issues do come up later on.
If you need a partnership agreement, make sure to draft one professionally with a business lawyer. Rana Charif Law Firm provides customized partnership agreements, notices of withdrawal from partnerships, joint venture agreements and other essential business agreements.
Contact us at firstname.lastname@example.org or 647 806 9184.