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Properly constructing your partnership agreements

A strong partnership can help to advance your company. However, not having the proper regulations in place may make that relationship difficult.

Before you have to address any business law matters, it may be possible to resolve common issues with the partnership agreement. By making sure that your agreement contains specific aspects, you can stand confident in your partnership moving forward.

Get it in writing

It is critical that you get your partnership agreement in writing. In the case that you have a discrepancy and seek legal action, the California Revised Uniform Partnership Act will automatically govern your partnership if there is no written agreement in place. Under this act, there are set stipulations, such as the fact that the business is split equally. This can prove to be problematic if you have specifically negotiated contract terms in play. For example, if by chance you originally agreed to a 60-40 split, this may not hold if you cannot show it in writing.

Denote responsibilities

As with any contract, there are specific actions that you expect individuals to take or avoid. A proper partnership agreement will detail the main responsibilities and restrictions that each party must abide by. Some common contract stipulations include:

  • Percentage of ownership
  • Decision-making
  • Profit and loss allocations
  • Binding the partnership
  • Procedures after death of a partner

The California Corporations Code Division 1 Chapter 1 lays out the basics for requirements of a corporation. Make sure that the aspects of your agreement align with those basic requirements.

Plan for resolution and dissolution

While both parties are in a good place, it may be beneficial to discuss conflict resolution strategies and amicable dissolution of the partnership. Though you hope not to need to use these clauses, having them in place from the beginning can aid in smoothing the process should such situations occur.

These are just a few key considerations for a partnership agreement. Depending upon the nature of your business, additional aspects may be beneficial. Take some time to review the possible factors to determine the right ones for your partnership.

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