There are many who are interested in starting a partnership business with their family members or friends. This business is generally owned by two or more entities or people. They need to follow the partnership agreement and they need to prepare a partnership agreement checklist prior to starting the business. It helps to avoid future conflicts of any type.
This written document clearly outlines the duties, rights, responsibilities, and limitations of each and every partner involved in this business. It also describes how to run the company, who will make decisions with regard to the sharing of profits & losses, etc. If there isn’t a comprehensive partnership agreement prepared, the company’s survival and success will be at risk. Hence, it becomes important to know what to cover in the partnership agreement checklist!
1. Partners: The agreement is to include a list of partners to participate in the business and their contributions. Some partners might contribute labor, time, and other cash. Each partner needs to be given a specific ownership percentage.
2. Company name: The agreement needs to have the company’s name. But the name cannot be anything that the partners like. If the decision is to have a name that is not that of the partners, then it becomes crucial to register a fictitious owner affidavit, as required in some states.
3. Decision-making: It should clearly outline the decision-making authority level of each partner. Before making major decisions, some agreements may require prior consent from each partner. But in others, the partner can make decisions without requiring the consent of other partners.
4. Partner’s responsibilities: Every partner’s responsibilities and rights need to be stated clearly in the partnership agreement checklist. Each partner can bring different expertise levels. Hence, the agreement is to list the responsibility of each partner.
5. Compensation: What payment needs to be made to the partners should be mentioned in the agreement. The partners can decide the payment frequency and surrounding amounts. The allocation of profits & losses also needs to be considered.
6. Dissolution: The dissolution strategy of the partnership should be mentioned in the agreement to avoid unnecessary future legal disputes. This is undoubtedly one of the most common instances noticed across the globe.
7. Dispute resolution: It is not necessary for partners to always agree to one another’s decisions. How conflicts are to be resolved so as to prevent unnecessary legal disputes among partners should be written in the agreement.
Having the above points in the partnership agreement checklist will ensure a wonderful journey and success in the business.
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