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The advantages of a written partnership agreement

On Behalf of | Sep 30, 2020 | Business Formation, Partnership Agreements And Disputes |

If you form a business with another person, you should create a written partnership agreement. This is generally a good idea whether the company is based in Texas or any other state. The agreement should state how profits are shared and the roles that each person will have.

Take care of future problems today

A partnership agreement can help to determine what happens if a partner dies, becomes disabled or simply wants to exit the company. It can also develop protocols for how partner disputes or other problems will be resolved. With a written agreement, you and other owners retain control over how conflicts are resolved as opposed to letting a judge do so on the company’s behalf.

Think about tax and liability issues

There is a chance that you will be held liable for the actions of your partners, and a partnership agreement can help to clarify or limit the extent of your liability for what others do. Furthermore, the partnership agreement can determine how to account for losses as well as how they are distributed.

Ideally, you will create a partnership agreement as early as possible during the business formation process. However, it may be possible to create or modify an agreement after the company begins operating. An attorney might be able to review a partnership agreement before it goes into effect, and legal counsel may also review a contract if a dispute occurs or the existing agreement needs to be changed.