Posted: February 18, 2010
Written by: Brant Harvey
Partnerships are a common and effective method to carry on business. They typically allow individuals to combine their specific talents, skills, and resources in a way that (ideally) creates a more successful business enterprise than could be achieved by each partner on their own. As mentioned in a previous posting, whether a person forms a general partnership or a limited partnership, it is critical to have a well crafted partnership agreement in place.
Among other issues, a partnership agreement may address:
1. Length – how long will the partnership last? Is there a specific term in mind?
2. Business Limitations – is there a limitation on the type of business that the partnership can carry on? What is the scope of the business?
3. Capital Contributions – how much is being contributed by each partner?
4. Division of Profits, Expenses, Losses – how are these calculated or addressed?
5. Termination of Partnership – what mechanisms are in place to enable a partner to withdraw or terminate the partnership?
6. Assignment and Addition of a New Partner- can a partner assign their interest in the partnership? How can a new partner be added to the partnership?
7. Valuation – what is the method by which the partnership will be valued? What is included in the value of the partnership?
8. Dispute Resolution – how are disputes among the partners to be resolved?
The above is not an exhaustive list of what should be included in a partnership agreement, and the final form of a partnership agreement will depend on the specific issues of a particular partnership. Before you “saddle up” and begin a partnership, it is a good idea to consult your legal professional.