Article by Nemelou Despuez
Partnership Agreement: Avoiding Disputes Between Establishment Owners – Law
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A comprehensive agreement can help business partners to avoid disputes since it will clearly state their exact responsibilities, duties, and rights. Another advantage of a written agreement is that the state will not be able to control some important aspects of the business, allowing people to tailor their policy to meet the needs of their companies.
Before creating a written partnership contract, people should consider the following:
* Name of partnership. Business partners should decide a name for their company or establishment. Usually, people use their surnames (e.g. Silverstone & Wellington) or a fictitious name for their business. However, when choosing the latter, businessmen should make sure that the name is not used by any other company.
After choosing a name for a business, partners can file this to the county clerk.
* The share of profits and losses. This clause states the percentage of profits and losses each partner will receive. This will also show the timetable of share distribution (e.g. monthly, quarterly, or annually).
* The percentage of ownership. Probably the most important consideration in establishing a partnership contract, this clause will state the partner who will contribute for the cash, services, and properties.
* The authority of each partner. This will state if a partner should seek the consent of others when making decisions for the company.
* Decision-making process. This clause will state the voting process for passing certain business decisions and includes the number of votes needed to be considered as a unanimous decision.
* New partners. A contract should state the procedures for admitting new partners in case that the owners need funding to expand their business.
* Death or withdrawal of a partner. This will include the conditions for a departing or deceased partner. For example, many companies do not allow its owners to sell their shares to anyone outside the business, but only to their partners. In addition, some firms require the surviving relatives of a deceased partner to sell the shares, instead of becoming part of the company.
* Duties and responsibilities. This clause should answer these questions: Who will deal with the clients? Who will do the advertising? Who will manage the employees and operation? And who will negotiate with the suppliers?
* Resolving internal disputes. In the event of disagreement, business partners should prepare methods to resolve this, such as arbitration and mediation. These resolutions are better than court litigation which are costlier and may even injure relations.
The Importance of Corporate Lawyers
To avoid any legal loopholes, business partners should consider the advice of corporate lawyers who will help them establish a well-written and comprehensive partnership agreement.
About the Author
Our expert corporate lawyers provide assistance in drafting partnership agreement and other corporate matters. For consultation, visit our website and avail of our free case evaluation.
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Nemelou Despuez
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