What should a partnership agreement cover?
“An ounce of prevention is worth a pound of cure.” – Benjamin Franklin
Whether a general partnership, limited partnership or joint venture, all business partnerships will one day come to an end. It’s an unfortunate fact, many partnerships come to an end and the partners disagree on winding up business. Often times, there are hurt feelings as partners have invested an immense amount of time and money in the business. The venture often represents a life dream for each individual partner and it is emotionally difficult to see that dream come to an end. This is often compounded where family or friends entered into a partnership with each other or borrowed money to finance the operation. The best way for partners to stay friends is to have a written agreement at the beginning.
A partnership agreement will help avoid costly misunderstandings and conflict.
Unresolved disputes may lead to a breakdown in the business. No matter the form or the business undertaking that the partnership is involved in, it is crucial to define the roles of each individual partner, their rights and obligations. It is also imperative to articulate an exit strategy whereby partners can make a clean break from the business. While many partners do recognize that the partnership will one day cease to exist, many procrastinate and do not develop a plan for winding up the business. This only leads to a greater headache when the partners disagree on major business decisions.
How can an attorney help me with a partnership agreement?
Please remember that there are ethical considerations that an attorney must strictly follow when counseling individuals who wish to form a partnership agreement. If you have questions about these ethical rules and how they may affect you in the future, do not hesitate to ask.
An attorney should sit down with you and discuss the needs of the partners and the business as a whole. During this consultation, both the attorney and the partners have a chance to interview each other. The attorney may even ask questions or raise issues which you and your partner have never even considered or discussed. Remember, a partnership is a lot like a marriage, and you will be spending a great deal of time with your partner over the coming years.
If your attorney carefully drafts a partnership agreement for you, it will ensure that all of the partners have agreed upon goals. It will also ensure that there is not a calamity if/when partners disagree, die, become ill or wish to leave the partnership.
Partnership Agreement | Attorney | Richmond, Virginia
