subject: Starting A Business And Knowing About Partnership Agreement [print this page] According to David Finkel, who is a consultant of the owners of Premier Christian Cruises, almost 75 percent of businesses partnerships dont have written partnership agreements and no solid conversations on which are not working for the business.
Sixty-plus percent havent had consistent dialogue at least twice a year about the direction of the company and prioritizing roles in the business. Premier hasnt had this discussion in at least 12 months, which can be deadly for a company that wants to scale and grow, said Finkel.
Business owners roles
In order to clarify each others business roles, create a partnership agreement. A partnership agreement is a legally binding document that defines ownership of the company and protects each owner from anything that could happen to the partnership.
By creating this type of agreement, the states default rules on partnership operation are avoided. It doesnt have to be complicated as long as it is specific.
First, it should contain important information about the management and each partners percentage of ownership. Second, it should have each partners profit percentage. Third, it should provide how business conflicts or problems are solved.
Furthermore, it should contain the full name of the partners and the trade names of the business/es, length of time of the partnership, purpose, and contributions as well as investments of each.
It should also state the salary, terms of agreement on how a partner will leave the partnership, whether business outside is allowed, how partners can be expelled and how they can bring in new partners.
Once there is a partnership agreement, an operating agreement can be built. It contains specific duty details wherein executives will fulfill. Then have an organizational chart. This will also help them know what their strengths and weaknesses are. Lastly, it is also vital for the business to have regular meetings to talk about the goals of the company.
Different types of partnership
General partnership
A general partner contributes money to the partnership and has a say in the daily operations. He has the unlimited liability for the debts and obligations of the business.
Limited liability partnership
This has one or more general partners and one or more limited liability partners. The general partner manages the business and contributes capital to the partnership. He also has the unlimited liability for the debts and obligations of the business.
A limited partner can contribute his capital but cant actively manage the business itself. His liability is only on the amount of capital he contributed to the partnership.
