Running a business with friends or others who share your vision and values can be extremely rewarding. This in part explains the appeal of partnerships – joint business ventures between two or more individuals in which each participant shares the costs and profits of the business. Your partnership, however, will only be as strong as the agreement which governs it. Costly and damaging partnership disputes can arise even between the best of friends, and when they do you may find that your business goals are brought to an abrupt halt. An experienced California business partnership agreement attorney can help you avoid this.
Best Practices for Partnership Agreements
Before starting your partnership, you and your soon-to-be partners should create a business partnership agreement to govern the operation of your business. In general, the more specific you make this agreement, the more benefits you and your partners will derive from it. More specifically, your business partnership agreement should:
Be in writing. No matter how good of friends you and your partner(s) are, your partnership agreement should be in writing and signed by all partners after each are given the opportunity to consult with an attorney. Having your agreement reduced to writing eliminates the troubles that can arise when important terms of the agreement are forgotten or remembered incorrectly.
Be specific. The more situations and circumstances you can address through your partnership agreement, the stronger your partnership agreement will be. Your partnership agreement should define what capital each partner is contributing to the partnership and what each partner’s responsibility should be in the event that more capital is needed. The agreement should also describe how partnership decisions ought to be made – especially important decisions – and who, if anyone, has the “final say” in such decisions. Your agreement should also describe what should happen in the event a partner dies or becomes unable to fulfill his or her responsibilities as well as the circumstances under which your partnership would be dissolved.
Be updated. As your business changes, you may wish to revisit your partnership agreement and make sure it still provides you and your partners with the protections and directions you desire. How you and your partners made decisions at the outset may not be how you wish to make decisions going forward. Or your original agreement may not have addressed what ought to have happened in the event of a partner’s death or disability. It is best to periodically review your agreement and amend it as necessary as opposed to waiting until a crisis develops and then attempting to navigate the crisis using an incomplete or outdated agreement.
This article was originally published on jgpc.com.