Partnership disputes are a concern most new partnerships wish to avoid. For that reason, parties entering into a partnership agreement should be familiar with what to include so they can help avoid a partnership dispute down the road.
Elements of a partnership agreement to include
When developing a partnership agreement, it should include:
- Contributions – the partnership agreement should clearly detail the contributions of each of the partners to the formation of the partnership and its ongoing finances.
- Distributions – the partnership agreement should clearly detail how distributions will be made to partners and if any partner will receive a salary.
- Ownership – the partnership agreement should clearly outline ownership of the business and what happens if an ownership interest is sold. There are a variety of potential complexities associated with ownership of the business that should be addressed in the ownership agreement.
- Decision-making – the partnership agreement should clearly outline how decisions will be made and who will make them for the partnership and how the partnership will be managed on a day-to-day basis.
- Dispute resolution – the partnership agreement should clearly state how disputes will be handled and if there is a dispute resolution process that will be followed should a dispute arise.
- Unexpected events – the partnership agreement should address what will happen if an unexpected event arises such as a partner death or illness or a buyout of the partnership.
- Dissolution – the partnership agreement should clearly outline the dissolution process for the partnership.
Business law can protect partnerships and other new business owners entering into a business. For it to do that, business owners should be familiar with what to include in their partnership agreement and how the legal process can help them if they find themselves in a partnership dispute which could be based on a contract dispute, alleged breach of fiduciary duties; alleged misconduct; or for other reasons as well.