Thinking about forming a partnership? That’s natural, since it’s nice to combine talent, money and resources with another person. It can be more fun to share the adventure. It can be your worst nightmare also. The first thing you need to address in your new partnership is a partnership agreement.
A partnership agreement is a legal document that dictates how a small for-profit business will operate under two or more people. The agreement lays out the responsibilities of each partner in the business, how much of the business each partner owns, and how the profits are distributed.
What happens if after you start operating your partnership, you have a disagreement with your partner? If you can’t resolve between yourselves, you will have to go to the courts. There are general business laws, but these laws offer a standardized approach to running a partnership and resolving common issues, but they’re not customized to your business and can lead to results you didn’t intend. For example, your partnership may have to be dissolved and re-formed if one partner decides to leave.
Certainly, having to resort to the courts is going to be expensive and painful. A lot of issues can be avoided if you create a good partnership agreement up front.
What happens if a partner dies or becomes unable to continue operating the business? Who inherits their share of the company, and does the new owner(s) also inherit their responsibilities or decision-making rights? Do the other partners have a right to buy out the departing partner’s interest? Include this clause to prepare your business for the unexpected as well as to think long-term about the possibility of your business outliving its founders.
This is just one of many issues that you may not have thought about. You should make an appointment and talk to Ben Winter. Ben Winter, P.A. focuses its practice in the areas of real estate law, Social Security Disability and Workers Compensation in St Petersburg, Florida. For more information, go to our web site www.benwinterlaw.com or call (727) 822-0100.