A proper partnership agreement can protect your business

On Behalf of | Sep 8, 2022 | BUSINESS & COMMERCIAL LAW - Business Formation & Planning

Without a solid partnership agreement that defines each partner’s duties and responsibilities, your partnership may be built on quicksand. Fallouts among partners can be the beginning of the end of your partnership.

Therefore, it is crucial to have such an agreement even before you hit the ground running with your business partners. It could determine the future of your venture.

A partnership agreement is akin to the constitution of your business. It dictates how every aspect of the partnership will be handled, from finances to business operations. Its importance to a partnership venture cannot be overstated.

What should you include in a partnership agreement?

A basic partnership agreement contains the name and nature of the business alongside relevant information about the partners. Your document should, at a minimum, address the issues below:

  • Each partner’s stake and contribution to the business
  • The duties of each partner
  • The decision-making authority of partners
  • The distribution of profits and losses among the partners
  • What happens when a partner dies or is unable to continue in their role
  • The process of adding or removing a partner
  • The liability of every partner
  • How disputes among partners are resolved

Depending on the nature of your partnership, you should include specific clauses that will deal with potential challenges or scenarios you are likely to face in the future.

Partnership agreements are enforceable

A partnership agreement is legally binding to the partners and can be enforced in a court of law. As such, it is crucial to ensure that you do not have any ambiguity in the language used or leave loose ends when creating the agreement. It could open a can of worms when issues not covered by the agreement arise.

It may be advisable to seek assistance in creating a comprehensive partnership agreement that will serve its purpose and safeguard your business interests.