A formal agreement between partners that establishes the rights and responsibilities for general partners, as well as the rules in a for-profit partnership and more.
What is a partnership agreement?
A partnership agreement is a formal agreement between partners that establishes the rights and responsibilities for general partners, as well as the rules in a for-profit partnership and more.
What does a partnership agreement cover?
A partnership agreement covers, amongst other things, the partnership start date, address, name, and purpose, contact information and duties for each general partner, description of partner capital contributions, profit and loss distribution (equal share or fixed per cent), rules regarding the admission of new partners, withdrawal of existing partners, and partnership dissolution, accounting methods, and annual report details, who is responsible for day-to-day management of the business, when meetings are held, voting rules, and how decisions will be made, including which decisions require unanimous consent from all partners, and more.
When should I use a partnership agreement?
You should use a partnership agreement when you are going into business with partners and intend to share profits and losses, and avoid the formalities of an incorporated company.
Do I need a partnership agreement?
A partnership agreement is vital in setting up clear business expectations to help partners avoid future misunderstandings and to define and protect each partners positions.
It is recommended that partners include clauses about ending the business partnership (dissolution), specifically whether a vote is required to end the business, and how property and assets will be divided.
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