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What should a partnership agreement contain?

On Behalf of | Aug 24, 2020 | Business Law And Litigation |

Businesses don’t have to be run by a single person, and partnerships are commonplace in Texas. But it’s important to minimize potential disputes in such partnerships by creating clear contractual documents rather than relying on “handshake deals.” Here are some elements that can contribute to strong and sustainable agreements:

Ownership.  Who owns what? Is the deal a 50-50 split, or does one party own controlling interest? Is a partner able to sell ownership without any input from the partner? What happens when a partner dies? Putting these elements and more into the partnership agreement could make things easier for everyone.

Profit distribution. These details should be defined clearly. All those involved in running a business want to earn profits. By detailing how profits are distributed and when payments are received, partners may be able to avoid disputes and concerns.

Decision-making powers and division of responsibility. Everyone needs to know who is in charge and who decides what. The failure to cover these points may lead to conflicting and ambiguous decisions. The same logic may apply to each partner’s responsibilities in the office. Perhaps one partner handles product purchases while the other deals with public affairs. An agreement that itemizes and clarifies these points could keep a partnership and the business on track.

Without these basic elements in place, partners could encounter significant disagreement. With a resolution process in place, the differences could be effectively handled. In worst-case scenarios, the partners might follow previously defined dissolution steps to avoid business litigation.

Drawing up contractual documents detailing procedures for partnership agreements and disputes could make things less stressful for all involved. The business might find itself on better footing as well. Meeting with an attorney at the outset may prove beneficial.