There are many who are interested to start up 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 which they need to prepare a partnership agreement checklist prior to starting the business. It helps to avoid future conflicts of any type.
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What is the partnership agreement checklist?
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 take decisions with regards to the sharing of profits & losses, etc. The company’s survival and success will be at stake if there is not a prepared a comprehensive partnership agreement. Hence, it becomes important to know what to cover in the partnership agreement checklist!
What is covered within the partnership agreement checklist?
- Partners: The agreement is to include a list of partners to participate in the business and their individual contributions. Some partners might contribute to labor and time and other cash. Ownership percentage to be grated to every partner also needs to be incorporated.
- 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 of the partners, then it becomes crucial to register fictitious owner affidavit, as required in some states.
- Decision making: It should clearly outline the decision making authority level of each partner. Prior to taking major decisions, some agreements may require prior consent from each partner. But in others, the partner can take decisions without requiring the consent of other partners.
- Partner’s responsibilities: Every partner’s responsibilities and rights need to be stated clearly in the partnership agreement checklist. Different expertise level can be brought by each partner. Hence, the agreement is to list the responsibility of each partner.
- 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. Allocation of profits & losses also needs to be considered.
- Dissolution: Dissolvent of partnership strategy 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.
- Dispute resolution: It is not necessary for partners to always agree to one another’s decision. 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.