What Goes Into a Great Partnership Agreement?

A partnership agreement is a great way to bring two different viewpoints together into an effective business plan. Unfortunately, these partnerships can often become strenuous when a business faces hardship. When business owners decide that the partnership is no longer working out, the litigation of a business divorce can get messy quickly – and even more so without a rock-solid partnership agreement. Before you enter into a partnership, you should consider the benefits that a partnership agreement can bring to both you and your partner.

Why Should I Consider a Partnership Agreement?

The goal of a partnership agreement is to establish the operational rules for operating the business, and without one, you may find that your business lacks the necessary rules for handling issues when they arise. We’ve seen several businesses that operate without a partnership agreement, which we don’t recommend. A contractual partnership agreement can limit liability for both partners, delegate the stake of the company and its profit, as well as provide several other protections to owners. The end goal of a great partnership agreement should be to establish the rules that will dictate the basic operational procedures for partners, their duties and obligations, and contingencies for partners leaving or joining the business.

Partnership Agreements Establish Boundaries

By solidifying the responsibilities in the partnership agreement, each party knows what their obligations are. This way, if any partner is not fulfilling their role, you can hold them accountable for what they promised to deliver. It can also be used to establish the rules for decision-making between partners, the division of profits and losses, and plans for if a partner leaves or sells their part of the business. Without these rules in place, a conflict between partners is much more difficult to navigate.

A quality partnership agreement should include plans for the future, including the addition of other partners and plans for continuity in the event that a partner leaves the company. This may include plans for buying out a partner should they leave the company, which can ensure that ownership is transferred as intended when a partner makes the decision to leave. As always, it’s recommended to consult legal counsel before any signatures go on paper. If you’re in search of assistance in drafting your partnership agreement, contact Albright & Lumpkin, PC today, or call our office at (713) 455-6661 to get started.

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Albright & Lumpkin, PC

At Albright & Lumpkin, we help individuals, families, and business owners achieve their goals and protect their futures.

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