A partnership, as commonly defined, is a type of business structure with two or more owners (partners) who has not filed any application with the state to transform their business into a corporation or LLC (Limited Liability Corporation.) Partnerships may be categorized under general partnership or limited partnership.
To add further, partnerships can be considered as the simplest and most inexpensive co-owned corporate business structure in terms of establishment procedures and maintenance.
Meanwhile, in partnership establishment, it is vital for you to have a well-drafted partnership agreement that lay down the rights and duties of each owner. Creating one will equip your business in settling conflicts – from minor disagreement to major disputes. Unless you have such contract, the laws in your state will completely govern almost all aspects of your business.
In a partnership agreement, you may include details involving profit (or losses) sharing, individual responsibilities of each partner, terms in leaving the partnership and other vital regulations.
Following are the major information that you should consider in furnishing a good partnership agreement:
• Partnership Name – Not all corporate players give high regards to this important feature of doing business. Yet, this is considered by many to be significant in partnership establishment. Without a good and viable business name, your business may not have an appeal to your clients.
In registering your partnership, you may opt to use your surnames or just file your partnership under a fictitious business name.
• Partnership Contributions – One of the major reasons that tend to cause the downfall of a business partnership involves disputes regarding contributions or ownership percentage. Thus, to avoid this from happening to your company, you should identify and record the contributions that each partner has provided for the company before it starts its operations.
• Profit and Loss Allocation – Individuals engage into business to earn income. Therefore, it is also an important matter to discuss this issue with all other partners and put it into writing. Also as important is the agreement regarding the distribution of losses that might occur in running your business.
• Terms in Decision Making – Since each owner may differ in their opinions regarding various matters revolving around the business such as policies and procedures, it is just necessary to have, beforehand, an arrangement on decision-making.
Although there are some partnerships wherein a single partner has the full authority to decide on particular issue, others resolve it through votes wherein all partners will have participation.
• Administrative Functions – Since a partnership involves collective efforts between partners, distributing management duties is of prime importance. A person each should be assigned to handle employee supervision, supplier negotiation, bookkeeping, among other duties and functions.
You, then have to make sure that someone is tasked to supervise each post.
• Admission and Withdrawal of Partners – If in case you want to have a business expansion and open your partnership to other investors, you need to have a standard admission procedure to prevent disagreements. This is same when a partner decides to depart from the company.
• Dispute Resolution – Deadlocks may happen especially in major decisions. A good partnership agreement must tackle this matter. It may suggest alternative dispute resolutions, such as mediations or arbitrations in resolving a disputed issue.
Finally, furnishing a fine partnership agreement is very critical in partnership establishment. It is vital then to seek a corporate attorney’s assistance to make sure that it is done precisely and under the bounds of law.
About the Author
Our expert business and corporate lawyers are knowledgeable in business processes, deals and transactions such as partnership establishment. To help you with your legal issues in business, you can visit http://www.attorneyservicesetc.com/ and have your case evaluated.See Also:
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