Whether you are starting a new business with a partner or bringing on a new partner to an existing business, having a clear and comprehensive partnership agreement could not be more important. In fact, here at Bounds Law, we would say that a Partnership Agreement quite possibly may be one of the most important agreements to do and to do it right the first time. So many issues we see here with failing businesses, is those with shaky partnerships. A lot of these stems from a failure to create the right foundation, which includes that partnership agreement.
Here are just a few of the reasons why having a partnership agreement is crucial for any small business:
- Clarifies Ownership and Roles
A partnership agreement sets out the ownership structure of the business, including the percentage of ownership held by each partner. It also outlines each partner’s roles and responsibilities within the business, which can help prevent confusion and misunderstandings about who is responsible for what.
- Defines Decision-Making Authority
A partnership agreement should clearly outline how decisions are made within the business, including who has decision-making authority and how votes are conducted. This can help prevent disagreements and disputes over important business decisions.
- Sets Out the Terms of Dissolution
No one wants to think about the possibility of a partnership dissolving, but it’s important to have a plan in place just in case. A partnership agreement can set out the terms of dissolution, including how assets will be divided and how outstanding debts will be paid.
- Protects Each Partner’s Interests
A well-drafted partnership agreement can protect each partner’s interests by addressing potential issues such as compensation, profit distribution, and buyout provisions. This can help prevent disputes and ensure that each partner’s interests are taken into account.
- Provides a Framework for Dispute Resolution
Even the best partnerships can run into disputes from time to time. A partnership agreement can provide a framework for resolving disputes, whether through mediation, arbitration, or other means. This can help prevent costly and time-consuming legal battles down the road.
Having a solid partnership agreement is a must for any small business with partners. At Bounds Law, we can help you draft a solid partnership agreement that meets your specific needs and protects your interests. Schedule a consultation HERE and get the right legal foundation.
