Important Terms to Include in Partnership Agreements

Feb 06, 2015 By Levi Hatch In Business No Comment Tags : , , , , , ,

If you are entering a partnership with another party, it is important to draft a partnership agreement. Although you may not think it is necessary because the other party is somebody you trust, having an agreement in writing can help avoid legal disputes in the future as well preserve your relationship.

In some jurisdictions (such as New York), it is not a breach of contract for a party to withdraw from a partnership that was created orally. See Gelman v. Buehler. In other words, a partnership may be dissolved unilaterally if there are no particular terms or undertakings specified in the underlying agreement.

There are a variety of important terms to include in a written partnership contract, including the following:

  • Partner’s roles. It is imperative that the partnership agreement details the roles and duties of each partner. This includes outlining the time each partner will contribute to the joint venture, the labor or services each partner will provide, and the financial contributions required of each partner.
  • Distributions. Each partner’s ownership percentages should be specifically listed. The agreement should also detail the allocation of profits, losses, draws and distributions.
  • Authority. It is important to reduce your exposure to liability by providing that a partner is required to obtain the other partner’s consent before taking any action to bind the partnership entity. Your contract should also detail the management or operational responsibilities for each partner and what actions require a majority vote.
  • Resolving disputes. If disputes arise between the partners, it is helpful to have an agreement on how issues should be resolved. This may include requiring the partners to go to arbitration to reach a resolution.
  • Dissolving the partnership. If partners decide to part ways, the process is typically smoother if your agreement has established the dissolution process.

At Nielsen Law Group, we will not only help assist with what is the best structure for your business, but will also aid with the additional details (such as drafting a strong partnership agreement) that will foster a strong foundation and get you started on the road to success. Whether you need assistance forming your new business entity or establishing a more sophisticated corporation or non-profit organization we will be able to guide you the entire way. You can schedule your initial consultation by calling (480) 888-7111 or submitting a web request here.