A business that has more than one controlling individual may benefit from having a partnership agreement. As a legal document, a partnership agreement will do many things. It will define the liabilities, assets, and profit shares of each partner. It will detail the relationship between partners as well as describe how the partnership will run and govern the business. It is essential that the obligations and expectations of each partner are clearly defined.
If you are a California business owner who would like help drafting a partnership agreement, the California business partnership agreement attorney at the Leiva Law Firm can assist you.
Elements Necessary for a Comprehensive Partnership Agreement
Getting all the details correct in a partnership agreement and ensuring that everything is laid out precisely is critical. Consider the following elements.
- Define what your partnership structure is and use this for the title. For instance, you may be a general partnership or a limited partnership.
- Figure out what your objectives are for an effective partnership and outline these in the agreement.
- Discuss how long a partnership will last.
- Indicate what contributions each partner is responsible for. Contributions could be monetary, real estate, or a specific type of service.
- Establish how much of the business each partner owns via addressing stocks and business assets.
- Define the extent of authority and management that each partner will assume.
- Discuss how profit gains and losses will be handled amongst each partner.
- Detail the accounting protocols or procedures that are expected of each partner in their respective roles.
- Discuss the human resources aspects for each partner. For example, what are the working hours and weekly effort expected, the sick leave and vacation time allowed, salaries, and other administrative considerations.
- Determine what a partner is permitted to do and not do with respect to other business interests outside of the current partnership and company.
- Define how a partnership can be terminated.
- Discuss how new partners may be brought on.
- Consider all additional provisions that may describe what will happen in certain situations like how to handle dispute resolution, for instance.
There are several different types of partnership structures that may apply to your business and situation.
General partnership happens when partners sign an agreement to work together. This partnership agreement is both easy to make and to dissolve. Usually, the terms are straightforward, with gains and losses being evenly split between all partners. Each partner accepts total liability.
Limited partnerships must be authorized by the state. At least one partner will take on business liabilities while the others will not and serve more as silent investors.
Limited liability partnerships are similar to general partnerships, as all partners take part in running a business. While there is liability for the business as a whole, there is only limited liability for the actions of other partners.
Limited liability limited partnership is where there is usually a minimum of one partner that runs the business with other partners acting more as investors, but all partners have limited liability.
Speak to an Attorney at the Leiva Law
For more information on what to include in a partnership agreement and for help putting one together that meets your unique and specific objectives, please call the Leiva Law Firm today at (818) 519-4465. Initial consultations are free.