Establishing a solid legal partnership is often times favorable for business. If you have already decided that forming a legal partnership is in your best interest, than this guide will help you create a solid partnership agreement.
The first, and utmost important thing to do when creating a partnership agreement is to put it into written form. Also, unless you’re paying a lawyer to do it then you’re going to need a Partnership Agreement form. There are a lot of do-it-yourself kits out there with instructions and forms that comply with your state's specific laws. Some states require a notary to sign it along with the partners and some require you to have witnesses sign it or both. When your filling out the form, you should put down the agreement reached regarding responsibilities, and the rights in the business. This should all be done as quickly as possible.
Not having a legal partnership agreement written up will result in making you ill equipped to handle and settle any conflicts. Minor difference in opinion often times can result into a full-blow legal dispute, that's why a partnership agreement is essential. It also enables you to do a lot of things. It gives you a chance to organize the business relationship you and your partner(s) have in such a way that will be favorable for the business. It also clarifies issues like what direction the business would take when a partner absconds from his or her part in the business. This agreement is a great opportunity for essential guidelines in the business to be imposed.
Some essential things to remember are to discuss any agreements before officially putting them into writing. You will need to include things like your business partnership's name, which could be your combined names or the registered company name. It is also significant that you include each partner’s contributions to the business before opening it, and the ownership percentage that each partner is obligated to. Organizing the authority of each partner can also be a good idea in case the binding partnership agreement is not specific enough for a certain situation.
Some other important things to include in your partnership agreement are:
- How profits, draws and loses will be allocated to each partner.
- Who has the decision-making power in the process of important business matters?
- Anything regarding business expansion and the procedure of allowing in new partners
- Withdrawl, retraction, or death of the partner and how it should be properly handled.
- Setting up a way to resolve conflicts or disputes
All of these things should be considered when ratifying your partnership agreement.
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