PARTNERSHIP AGREEMENT CHECKLIST
1. What is a partnership agreement?
A partnership agreement can be oral, written, or implied. The agreement addresses issues as it relates to the partners themselves or between the partners and the partnership. The partnership agreement can also include amendments.
3. Benefits of a Partnership Agreement
A partnership agreement can prevent a lot of unnecessary litigation and bickering. It will not prevent all lawsuits, but a well-drafted partnership agreement can certainly aid in reaching a settlement because it can spell out the available remedies if a dispute arises between partners.
2. Why do I need a partnership agreement?
A lot of business startups begin as family owned operations which can lead to any number of fights and disagreements between partners. Even if the business partners are not relatives, it is always a good idea for every business to have a written document that outlines each person’s responsibilities and obligations to each other and to the organization itself. Each partner should know her role as it relates to the other partner and the partnership.
In addition to defining the roles and relationships of the partners, partnership agreements also help outline a course of action in the event of one partner’s death or illness. It can plan for an eventual buyout of one partner’s interest.
A partnership is not defective if the partners never formally sit down and draft a partnership agreement. If a dispute arises between the partners, then the default rules under the Uniform Partnership Act (Cal. Corp. Code Section 16100, et seq.) will help define the partners’ rights and duties.
PARTNERSHIP AGREEMENT CHECKLIST
- Name and address of each partner
- Partnership Address
- Duration of Partnership
- Purpose of Partnership
II. Capital Contributions
- Amount of contributions required from each partner
- Type of Capital Contribution: cash, services, property
- Value of each contribution
III. Rights, Duties, and Liabilities of Each Partner
- Management Decisions
-Decision making structure: partner, committee, majority
-Responsibility of each Partner
-Authority of each Partner
-Limitations on authority
- Voting Power
-Percentage interest or per capita
-General and specific actions requiring a vote
IV. Financial Issues
- Allocation of Profit and Loss
- Assumption of Debts by Partners and/or the Partnership
- Tax Issues
- Distributions to Partners
-Right to Distribution
-Frequency of Distribution
- Record Keeping
- Compensation of Partners
-Loans to Partner and from Partner
- Admitting new Partners
- Limitations on admission
VI. Dissociation : Procedures and Effect on Partnership
- Confidentiality provisions after disassociation
VII. Winding up, Dissolution, and Liquidation
- Distribution of Assets
- Allocation of Debts
VIII. Disputes Between Partners
- Remedies and Settlement of Disputes
- Attorney’s Fees
This is not a complete list. A partnership agreement should be rigid enough so the partners know what they can and cannot do. It should also be flexible enough to allow the partners to deal with unexpected issues as they arise. If you need help drafting your agreement, please contact an attorney licensed to practice in your jurisdiction.
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