Partnership Agreements: 4 Things You Will Want to Include

Anytime you are thinking about entering into a new business venture as a partnership, getting an agreement in place up front before things become difficult is a great way to ensure your partnership will endure rough patches and challenges that have traditionally disrupted less-prepared endeavors. However, such an agreement can only protect you against possible issues that are included within it. Thus, not all partnership agreements are created equally.

One of the main challenges of working with a partnership agreement is that they can be quite complex/lengthy. This makes knowing what’s most important to include difficult for entrepreneurs and business partners. To help you acclimate to the types of protections a written partnership agreement offers, let’s look at 4 things you will want to make sure are included in any agreement you use:

4 Things You’ll Want to Include in Any Partnership Agreement


How Assets Are Allocated

A section that outlines what funds are needed to run the business sufficiently and who is responsible for the funding and related issues is key. In addition, a strong asset allocation section will address issues such as how to handle profits and losses as well as authority for levels of expenditures made and costs incurred. Getting everyone on the same page about these issues before a conflict arises can save time, money, and disputes among partners.

How to Handle a Partner’s Exit

Life goes on. Eventually, you or your partner may want to exit the partnership because of other opportunities, divorce, retirement, or even the tragic occurrence of death. What happens to a partner’s interest in the event of divorce. Does a divorced surviving partner’s spouse have a say in how the business is operated? The truth is, that all kinds of negative impacts can befall your business when one partner dies or leaves. Including a section on how to handle this occurrence can go a long way to protecting your business’s ability to maintain a healthy profit.

Such a clause should stipulate methods for remaining partners to vest their interest into the ex-partner’s share of the business. Things like buy/sell agreements can also help head off any heated negotiations in the event a partnership sours.

The Process for Resolving Disputes

Inevitably, conflict happens. Acting like it won’t and not including a section in your partnership agreement on how to handle disputes when they arise can lead to great expense. Some disputes you will be able to resolve between your partner and yourself without any real guidance from a partnership agreement. But the disputes where such cooperation is threatened require clauses in a partnership agreement strong enough to protect the business. Possible methods of resolution include the use of collaborative law, mediation, and even arbitration – all timelier and more cost effective than litigation.

Each Partner’s Percentage of Ownership

Last but not least, a clear and established understanding of the percentage of the business each partner owns should be included in any partnership agreement you use for your business. This should include what each partner is expected to contribute and maintain during the running of the business. For example, one partner may be more hands-on and the other contributes financial investments. Whatever the split of ownership and responsibilities is, having it clearly laid out in your partnership agreement will protect you when possible conflicts arise.

In Conclusion

An experienced business attorney can help you draft a partnership agreement that protects you, your partner, and your business. But there are many more things a business attorney can do besides just this. If you have any additional questions about partnership agreements or wish to discuss other related legal issues, call Stephen Rizzieri at 214.434.1017 or fill out the form on our law firm site today.

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