Partnership Agreements Vital to Business Success

It is a must to have a partnership agreement when two or more people are the entrepreneurs of a company. Without a written agreement, the viability of the long-term business can be compromised. At the start of a business, it is close to impossible to forecast how the company will evolve over time. As such, a formal agreement helps to create a foundation between partners that should define significant business issues such as how funds are distributed, how disputes will be handled, and the job duties expected of each partner.

The structure of a partnership agreement should be tailored to fit the business and management style. It should state the compensation, including the profits, losses, and draw each partner will take. Moreover, and surprising to many new partnerships, it is also commonly considered as wise for one partner to have more shares than the other(s). Otherwise, it can become a situation where the company becomes stalled with equal decision makers at the top.

The agreement should additionally show the contribution each partner has made to the business, including property, funds, and services. It should further list how new partners can be added at a later time, when applicable. Of equal importance are outside business activities a partner might take on, and what is permitted.

Basics such as who has check-signing privileges and decision making authority or voting rights is also very important and should be included. And while legalese to many, miscellaneous provisions that cover matters like how the agreement can be revised at a later date to meet the growing needs of the business should also be incorporated into the partnership agreement.

Of particular importance are the portions of the agreement that define what action will be taken if a partner leaves or can no longer perform the job duties. This facet is also important for financing as lenders want to see a rational agreement that will help the business maintain stability should this occur.

Stipulating what will happen should a dispute ensue is also critical. Partners should think this through as arbitration or mediation can be a better route than litigation in most cases.

Partners should get a skilled business attorney to create the contract and review it to ensure that each person’s rights and obligations have been addressed and are fair. Without legal representation, the agreement might be so threadbare that state law might override it during a dispute. It might feel awkward to think about all of the “what ifs” during the infancy of the business, but it is crucial to ensure that the business can develop in a healthy way. Time spent with a qualified business attorney will pay off later.

In California, Los Angeles business attorney Anthony Spotora, of Spotora & Associates, P.C. is accomplished in counseling business partners to create solid partnership agreements. Their team of Los Angeles business lawyers helps many businesses, from California companies to major international corporate entities. They are known for their high-quality services and prompt attention to a client’s business needs.

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit

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This entry was posted on Wednesday, October 26th, 2011 at 12:27 pm and is filed under Business & Corporate Law. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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