Don’t Have Business Partners Without A Partnership Agreement
Business partnership agreements are an agreement between two or more people. The agreement is used to set forth the understanding between these individuals. This understanding includes the nature of the partnership, the management, contributions made and the termination. The agreement is required by most every state when forming a partnership.
A general partner who assumes, in most cases, an unlimited liability, manages partnerships. This unlimited liability means that both the general partner’s partnership interest and personal assets are at risk. A partnership agreement can be for a general, limited and limited liability partnership. General partnerships have unlimited liability shared by each general partners. A limited partnership is managed by one general partner and limits the liability of the limited partners. This limit is the partner’s partnership interest. Finally, the limited liability limited partnership extends protection to the personal assets of the general partner. This type of partnership is recognized in a handful of states.
A business partnership agreement consists of language on the name and type of partnership business. It also discusses the length of time for the partnership and the circumstances for termination and dissolution. These clauses are typically required under the state law in which the partnership is organized. One of the important areas of the business partnership agreement is what happens if a partner dies or leaves the partnership.
A way in which to prevent the partnership from automatically dissolving is through a buy-sell agreement. A buy-sell is used to provide a funding mechanism in the event of a partner’s death or disability. Instead of the terminating partner’s shares going to their heirs, the agreement allows the remaining partners to acquire the interest. This allows for the continuation of the business with little disruption.
Consult with a legal professional with expertise in drafting business partnership agreements. Although there are template forms that are available in office supply stores, they may not be adequate. There are however places on the Internet that can assist in drafting a state-specific agreement.